Assume the Following Information: Spot Rate Today of Swiss Franc

question 27

Multiple Choice

Assume the following information: Spot rate today of Swiss franc
=
$) 60
1-year forward rate as of today for Swiss franc
=
$) 63
Expected spot rate 1 year from now
=
$) 64
Rate on 1-year deposits denominated in Swiss francs
=
7%
Rate on 1-year deposits denominated in U.S. dollars
=
9%
​
From the perspective of U.S. investors with $1,000,000, covered interest arbitrage would yield a rate of return of ____ percent.

• A) 5.00
• B) 12.35
• C) 15.50
• D) 14.13
• E) 11.22

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