Suppose that the spot GBP/EUR rate is So = 1.2, and the 3 year risk free...
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Suppose that the spot GBP/EUR rate is So = 1.2, and the 3 year risk free interest rates are rEUR = 2% and TGBP = 3%. ● What is the 3 year forward exchange rate, also written as oF3? Show that arbitrage is not possible assuming that you could alternately invest in the bank using the spot rates provided Suppose that the spot GBP/EUR rate is So = 1.2, and the 3 year risk free interest rates are rEUR = 2% and TGBP = 3%. ● What is the 3 year forward exchange rate, also written as oF3? Show that arbitrage is not possible assuming that you could alternately invest in the bank using the spot rates provided
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