Casper Landsten-CIA (A). Casper Landsten is a foreign exchange trader for a bank in New York. He has $0.9 million (or its Swiss franc equivalent) for a short term money market investment and wonders if he should invest in U.S. dollars for three months, or make a CIA investment in the Swiss franc. He faces the following quotes: Arbitrage funds available Spot exchange rate (SFr/$) 3-month forward rate (SFr/$) U.S. Dollar annual interest rate Swiss franc annual interest rate $ 900,000 1.2815 1.2737 4.795 % 3.203 % The CIA profit potential is 0.86 %, which tells Casper Landsten he should borrow U.S. dollars and invest in the lower yielding currency, the Swiss franc, in order to earn covered interest arbitrage (CIA) profits. (Round to three decimal places and select from the drop-down menus.) The CIA profit amount is $ (Round to the nearest cent.)

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.