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Suppose interest rate differential in dollar and Swiss francs

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Question;Suppose interest rate differential in dollar and Swiss francs is 4 percent per annum (U.S. and Swiss interest rates are 7 and 3 percent respectively) and SF is in 1.4 percent premium against dollar, with spot rate at $.633/SF and one year forward in SF is $.6419/SF.;What actions would you take to profit from the above scenario provided that you can borrow SF1, 000,000.00 or its dollar equivalent?

 

Paper#50283 | Written in 18-Jul-2015

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