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
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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?
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?
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