Consider the following: $$\begin{array}{l}
\begin{array} { l l r }
\text {Risk-free rate in Canada }&0.04 \text { year } \
\text {Risk-free rate in Switzerland }&0.03 / \text { year } \
\text {Spot exchange rate }&1.67 \mathrm{SF} / \$
\end{array}
\end{array}$$
Assume the current market futures price is 1.66 SF/$.You borrow 167,000 SF and convert the proceeds to Canadian dollars and invest them in Canada at the risk-free rate.You simultaneously enter a contract to purchase 170,340 SF at the current futures prices (maturity of 1 year).What would be your profit (loss)?

Question

Consider the following: $$\begin{array}{l}
\begin{array} { l  l r } 
\text {Risk-free rate in Canada }&0.04 \text { year } \
\text {Risk-free rate in Switzerland }&0.03 / \text { year } \
\text {Spot exchange rate }&1.67 \mathrm{SF} / \$
\end{array}
\end{array}$$
Assume the current market futures price is 1.66 SF/$.You borrow 167,000 SF and convert the proceeds to Canadian dollars and invest them in Canada at the risk-free rate.You simultaneously enter a contract to purchase 170,340 SF at the current futures prices (maturity of 1 year).What would be your profit (loss)?

Quizplus · Accepted Answer

The Answer of Consider the following: $$\begin{array}{l}
\begin{array} { l  l r } 
\text {Risk-free rate in Canada }&0.04 \text { year } \
\text {Risk-free rate in Switzerland }&0.03 / \text { year } \
\text {Spot exchange rate }&1.67 \mathrm{SF} / \$
\end{array}
\end{array}$$
Assume the current market futures price is 1.66 SF/$.You borrow 167,000 SF and convert the proceeds to Canadian dollars and invest them in Canada at the risk-free rate.You simultaneously enter a contract to purchase 170,340 SF at the current futures prices (maturity of 1 year).What would be your profit (loss)?

Consider the Following Assume the Current Market Futures Price Is 1