Copenhagen Covered (B). Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5.05 million, or t

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Copenhagen Covered B Heidi Hoi Jensen A Foreign Exchange Trader At J P Morgan Chase Can Invest 5 05 Million Or T 1 (46.9 KiB) Viewed 42 times

Copenhagen Covered (B). Heidi Høi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5.05 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. She now evaluating the arbitrage profit potential in the same market after interest rates change. (Note that anytime the difference in interest rates does not exactly equal the forward premium, it must be possible to make CIA profit one way or another.) Arbitrage funds available $ Spot exchange rate (kr/$) 5,050,000 6.1717 6.1976 3-month forward rate (kr/$) U.S. dollar annual interest rate 3.900 % Danish krone annual interest rate 5.100 % C interest rate currency, the dollar gaining on the re-exchange of dollars for krone at the end of the period. (Round to three The CIA profit potential is 0.471 %, which tells Heidi that she should borrow Danish krone and invest in the lower decimal places and select from the drop-down menus.)