Hong Kong Dollar vs Swiss Franc The forward contract for a 180-day on HKD is CHF0.1150 and the current spot rate is CHF 0.1155/HKD. The 180-day interest rate available to Cherry Blink in Switzerland...

Hong Kong Dollar vs Swiss Franc

The forward contract for a 180-day on HKD is CHF0.1150 and the current spot rate is CHF 0.1155/HKD. The 180-day interest rate available to Cherry Blink in Switzerland is 3% per annum, whilst in Hong Kong the 180-day interest rate is 5% per annum.

(a) Which country should Cherry Blink borrow and invest if the Cherry Blink intends to get profit form covered interest arbitrage?

(b) Determine the amount of profit from this covered interest arbitrage if you are going to use CHF5,000,000 or HKD in equivalent.