Jason Smith is a foreign exchange trader. At a point in time, he noticed the following quotes. Spot exchange rate $:SFr

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Jason Smith is a foreign exchange trader. At a point in time, he noticed the following quotes. Spot exchange rate $:SFr

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Jason Smith Is A Foreign Exchange Trader At A Point In Time He Noticed The Following Quotes Spot Exchange Rate Sfr 1
Jason Smith Is A Foreign Exchange Trader At A Point In Time He Noticed The Following Quotes Spot Exchange Rate Sfr 1 (389.08 KiB) Viewed 19 times
Jason Smith is a foreign exchange trader. At a point in time, he noticed the following quotes. Spot exchange rate $:SFr = 1.6627 Six-month forward exchange rate $:SFr 1.6558 Six-month $ interest rate 3.5% per year Six-month SFr interest rate 3.0% per year a. Ignoring transaction costs, was the interest rate parity holding? b. Was there an arbitrage possibility? If yes, what steps would have been needed to make an arbitrage profit? Assuming that Jason Smith was authorized to work with $1 million for this purpose, how much would the arbitrage profit have been in dollars?
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