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Assume the following information: Spot rate today of Swiss franc = $
Assume the following information:
Spot rate today of Swiss franc
=
$.60
1-year forward rate as of today for Swiss franc
=
$.63
Expected spot rate 1 year from now
=
$.64
Rate on 1-year deposits denominated in Swiss francs
=
7%
Rate on 1-year deposits denominated in U.S. dollars
=
9%
From the perspective of U.S. investors with $1,000,000, covered interest arbitrage would yield a
rate of return of ____%.
a.
5.00
b.
12.35
c.
15.50
d.
14.13
e.
11.22
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