1. With respect to vacant land generating insignificant amounts of income, which statement is correct?
a. All costs of carrying the land is deductible.
b. Interest and property taxes on the land can only be deducted to the extent of gross revenues generated on the land.
c. Any undeducted interest and property taxes will increase any future capital gain on the land.
d. Any undeducted interest and property tax is added to the adjusted cost base of the land.
2. Heidi Jensen, a foreign exchange trader at JP Morgan Chase, can invest $5M or the currency equivalent of the banks short term funds in a Covered Interest Arbitrage with Denmark. Using the following quotes, can Heidi make a CIA profit?
Arbitrage fund available: $5M
Spot Exchange rate (KR/$): 6.1720
3 Month forward rate: (Kr/$): 6.1980
U.S. Dollar 3 month interest rate: 3.00%
Danish Kroner 3 month interest rate: 5.00%