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Casper Landsten-UIA (B). Casper Landsten is a foreign exchange trader for a bank in New...

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Accounting

Casper Landsten-UIA (B). Casper Landsten is a foreign exchange trader for a bank in New York. Using the values and assumptions below, he decides to seek the full4.799% return available in U.S. dollars by not covering his forward dollar receiptsan uncovered interest arbitrage (UIA) transaction. Assess this decision.

Arbitrage funds available

$

1,050,000

Spot exchange rate (SFr/$)

1.2811

3-month forward rate (SFr/$)

1.2743

Expected spot rate in 90 days (SFr/$)

1.2696

U.S. Dollar annual interest rate

4.799

%

Swiss franc annualinterest rate

3.202

%

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