Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $15 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Heidi plans to use the following quotes to make a covered interest arbitrage (CIA). Assumptions Arbitrage funds available Spot exchange rate (kr/S) 3-month forward rate (kr/S) US dollar 3-month interest rate Danish kroner 3-month interest rate Value $15,000,000 5.1197 5.1611 4.4679% 8.0239% Because for this level of analysis/problems, small differences in % lead to arbitrage profit/losses, please always use 4 digits in your calculations For your answer (since this is a dollars answer), round your answer to the nearest $0.01 (use 2 decimals). DO NOT USE commas to separate thousands. For negative results, enter the minus (-) symbol in front of the first digit/#. For example, if your answer is $4,000,287.329; then enter 4000287.33; if your answer is $400 then enter 400.00 If Heidi makes the covered interest arbitrage (CIA), what is the amount of the CIA profit if there is one?
Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $15 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Heidi plans to use the following quotes to make a covered interest arbitrage (CIA). Assumptions Arbitrage funds available Spot exchange rate (kr/S) 3-month forward rate (kr/S) US dollar 3-month interest rate Danish kroner 3-month interest rate Value $15,000,000 5.1197 5.1611 4.4679% 8.0239% Because for this level of analysis/problems, small differences in % lead to arbitrage profit/losses, please always use 4 digits in your calculations For your answer (since this is a dollars answer), round your answer to the nearest $0.01 (use 2 decimals). DO NOT USE commas to separate thousands. For negative results, enter the minus (-) symbol in front of the first digit/#. For example, if your answer is $4,000,287.329; then enter 4000287.33; if your answer is $400 then enter 400.00 If Heidi makes the covered interest arbitrage (CIA), what is the amount of the CIA profit if there is one?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $15
million, or the foreign currency equivalent of the bank's short term funds, in a
covered interest arbitrage with Denmark. Heidi plans to use the following quotes to
make a covered interest arbitrage (CIA).
Assumptions
Arbitrage funds available
Spot exchange raté (kr/S)
3-month forward rate (kr/S)
US dollar 3-month interest rate
Danish kroner 3-month interest rate
Value
$15,000,000
5.1197
5.1611
4.4679%
8.0239%
Because for this level of analysis/problems, small differences in % lead to arbitrage
profit/losses, please always use 4 digits in your calculations
For your answer (since this is a dollars answer), round your answer to the nearest
$0.01 (use 2 decimals). DO NOT USE commas to separate thousands. For negative
results, enter the minus (-) symbol in front of the first digit/#. For example, if your
answer is $4,000,287.329; then enter 4000287.33; if your answer is $400 then
enter 400.00
If Heidi makes the covered interest arbitrage (CIA), what is the amount of the CIA
profit if there is one?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcc3a14d3-17e0-4f1a-b937-89b06afdc692%2F1dd15505-2b8d-4581-8474-421a02984742%2Fuihlhm3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $15
million, or the foreign currency equivalent of the bank's short term funds, in a
covered interest arbitrage with Denmark. Heidi plans to use the following quotes to
make a covered interest arbitrage (CIA).
Assumptions
Arbitrage funds available
Spot exchange raté (kr/S)
3-month forward rate (kr/S)
US dollar 3-month interest rate
Danish kroner 3-month interest rate
Value
$15,000,000
5.1197
5.1611
4.4679%
8.0239%
Because for this level of analysis/problems, small differences in % lead to arbitrage
profit/losses, please always use 4 digits in your calculations
For your answer (since this is a dollars answer), round your answer to the nearest
$0.01 (use 2 decimals). DO NOT USE commas to separate thousands. For negative
results, enter the minus (-) symbol in front of the first digit/#. For example, if your
answer is $4,000,287.329; then enter 4000287.33; if your answer is $400 then
enter 400.00
If Heidi makes the covered interest arbitrage (CIA), what is the amount of the CIA
profit if there is one?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education