Parity relationships and arbitrage

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Reference no: EM1345886

You're an expatriate working for Bank America in Hong Kong, and examine the following prices. Formulate arbitrage strategy to profit from the situation.

Swiss Franc per Dollar exchange rate is 1.30 spot and 1.35 for 180-day forward.

Swiss interest rate is 6.00% compounded daily.

U.S. stock market index is 1500 today.

At today's level of the index, the average annual dividend yield on the stocks in the index is 3% (for simplicity, assume the dividends for your six-month holding period will all be paid at the end of 180 days).

The U.S. stock market index 180-day futures price is 1490

Reference no: EM1345886

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