1. Heidi Hoi Jensen is now evaluating the arbitrage profit potential in the same market after interest rates change. (Note that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CIA profit one way or another). | Arbitrage fund available Spot exchange rate (kr/S) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate $5,000,000 6.1720 6.1980 4.000% 5.000%

1. Heidi Hoi Jensen is now evaluating the arbitrage profit potential in the same market after interest rates change. (Note that any time the difference in interest rates does not exactly equal the forward premium, it must be possible to make a CIA profit one way or another). | Arbitrage fund available Spot exchange rate (kr/S) 3-month forward rate (kr/S) U.S. dollar 3-month interest rate Danish kroner 3-month interest rate $5,000,000 6.1720 6.1980 4.000% 5.000%

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 33QA

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