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Assume that spot rate of Swiss franc is AUD 0.70/CHF, the 1-year forward rate of...

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Finance

Assume that spot rate of Swiss franc is AUD 0.70/CHF, the 1-year forward rate of Swiss franc is AUD 0.74/CHF, 1-year interest rate on CHF is 7% and 1-year interest rate on AUD is 9%. If there is a possible arbitrage opportunity, the appropriate arbitrage strategy should be ___________ arbitrage; and the rate of return from covered interest arbitrage would be _______%.

Select one:

a. Inward; 13.11

b. Outward; 13.11

c. Inward; 3.77

d. Outward; 3.77

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