Arbitrage - Cash And Carry

[CFAhavemercy]

Hi guys,
I have been banging my head against the wall on this for literally hours and any feedback someone could provide would be more than appreciated.
Example 6 reading 48 spot rate swiss franc is $0.60, US interest rate is 6%, Swiss interest rate is 5%, futures contract expires in 78 days. If you caclulate the futures price it is $0.6012, the futures price quotes in the market is $0.62, and we are asked to execute an arbitrage transaction.
The futures price is too high so as I understand it we need to sell the futures, borrow risk free rate and buy the underlying.
My solution does not marry up with the text book solution so I was hoping someone could please tell me where my logic is wrong.
In caculating the return for dollar invested I think I should borrow Swiss Franc as it is cheaper at 5%, buy underlying at $0.60 — puting it to work at US risk free rate of 6.2%…. And then sell the futures….
The textbook has a strange way of solving this question - I was wondering how people on here have managed to cacluate the solution to this one, because I’m getting nowhere…. Thanks

 

[CFAhavemercy]

Any help or advice would be greatly appreicated, thanks guys

 

[S2000magician]

CFAhavemercy wrote:If you caclulate the futures price it is $0.6012, the futures price quotes in the market is $0.62, and we are asked to execute an arbitrage transaction.

The forward quote gives you too many USD for one CHF: $0.62 rather than $0.6012.
Because you would end up with too many USD, you start by borrowing USD.
I wrote an article on this that may be of some help: http://financialexamhelp123.com/covered-interest-rate-parity-irp-pricing...