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Compute the uncovered interest arbitrage profit amount

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Reference no: EM132744110

Question - Casper Landsten is a foreign exchange trader for a bank in New York. Using the values and assumptions below, he decides to seek the full 4.804% return available in U.S. dollars by not covering his forward dollar receipts-an uncovered interest arbitrage? (UIA) transaction. Assess this decision.

Arbitrage funds available $950,000

Spot exchange rate (SFr/$) 1.2813

3-month forward rate (SFr/$) 1.2743

Expected spot rate in 90 days (SFr/$) 1.2704

U.S. Dollar annual interest rate 4.804%

Swiss franc annual interest rate 3.197%

Required - Compute the uncovered interest arbitrage (UIA) profit amount?

Reference no: EM132744110

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