Question

Copenhagen Covered​ (B). Heidi​ Høi Jensen, a foreign exchange trader at J.P. Morgan​ Chase, can invest ​$5.1 ​million, or the foreign currency equivalent of the​ bank's short term​ funds, in a covered interest arbitrage with Denmark. She is 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	$	5,100,000
Spot exchange rate (kr/$)		6.1722
3-month forward rate (kr/$)		6.1978
U.S. dollar annual interest rate		4.100	%
Danish krone annual interest rate		5.050	%

The CIA profit potential is −0.702​%, which tells Heidi that she should borrow Danish krone and invest in the lower interest rate​ currency, the dollar ​, gaining on the​ re-exchange of dollars for krone at the end of the period. ​ (Round to three decimal places and select from the​ drop-down menus.)

The CIA profit amount is kr ___________________. (Round to two decimal​ places.)

Answer 1