Suppose that the current spot exchange rate is 6.25 Swedish Krona per $ and the three-month forward exchange rate is 6.28 SEK per $. The three-month interest rate is 5.6% per annum in the U.S. and 8.8% per annum in Sweden. Assume that you can borrow up USto $1,000,000 or SEK 6,250,000. Can you generate arbitrage profits? Show your profits both in USD and SEK terms.


SEK 4,250

USD 3,118

SEK 3,118