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Current spot USD/CHF rate: 1.3680 (1.3680CHF = 1USD)
3-month USD interest rates: 1.05%
3-month Swiss interest rates: 0.35%
(Assume annually compounding)
A currency trader notices that the 3-month future price is USD 0.7350. In order to arbitrage, the trader should investment:
A
Borrow USD, buy CHF spot, and sell CHF forward
B
Borrow CHF, buy USD spot, and sell USD forward
C
Borrow USD, sell CHF spot, and buy CHF forward
D
Borrow CHF, sell USD spot, and buy USD forward