Suppose interest rate differential in dollar and Swiss francs

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Suppose interest rate differential in dollar and Swiss francs is 4 percent per annum (U.S. and Swiss interest rates are 7 and 3 percent respectively) and SF is in 1.4 percent premium against dollar, with spot rate at $.633/SF and one year forward in SF is $.6419/SF.

What actions would you take to profit from the above scenario provided that you can borrow SF1, 000,000.00 or its dollar equivalent?

    • 12 years ago
    Suppose interest rate differential in dollar and Swiss francs
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