Short-term money market rates and the equivalent fx rates

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Reference no: EM131570205

In 2007, Billy Jean, an FX trader at ABN Ambro, Copenhagen branch, had USD 5 million or the foreign currency equivalent to place for his bank. He was asked to make a profit by his supervisors using the three month short-term money market rates and the equivalent FX rates. He was a fresh recruit, transferred from New York a week ago. You were his mentor in Copenhagen and were asked to provide him guidance by demonstrating this process with a diagram, showing him the possibilities of making a riskless gain. The rates he faced were: Spot DKK 5.0942 USD; Forward DKK 5.0980/USD; US money market rate 3.00% per annum; Danish money market rate 5.00% per annum.

Reference no: EM131570205

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