Question

You have the following market data. Spot price for the Swiss Franc is $1.156 per Franc....

You have the following market data.

  • Spot price for the Swiss Franc is $1.156 per Franc.
  • Two-month forward price is $1.22 per Franc.
  • U.S. dollar LIBOR for two months is a continously compounded rate of 1.75% per annum.
  • Swiss LIBOR for two months is a continuously compounded rate of 2.05% per annum.
  • Underlying asset for this contract (i.e., the quantity of Swiss Francs to be delivered in two months) is 500,000 Swiss Francs.

What is the total net profit if you execute the arbitrage strategy?

Do not round values at intermediate steps in your calculations. Enter your answer in dollars and cents to two decimal places, but omit the $ symbol and commas. For example, enter $1,234.56 as 1234.56 as your answer.

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