How is everyone remembering how to do the covered int arb questions? I’ve tried to figure out a simple way to do these, but I can’t. I can easily comput if there is an arb. opp.; And I can figure out which to buy/sell (Fwd or spot). After that I’m stuck. I don’t know who to borrow from, or how much to borrow, or how to net it out. I tried relating what is in Econ to what is in the Fwds reading, but for some reason CFAI decided to present it in Econ using DC:FC and in the Fwds reading as FC:DC. If I had a formula I could just make the two compatable, but instead they present it as a 4 step process that I can’t seem to calculate. How is everyone else doing these?
Always look at DC:FC as FC/DC and use the numerator / denominator concept instead.