Consider the Following Assume the Current Market Futures Price Is 1

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) ?

A) Profit of 630 SF
B) Loss of 2300 SF
C) Profit of 2300 SF
D) Loss of 630 SF
E) None of these

Correct Answer:

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