Look at Table 24.1. If the 3-month interest rate on Canadian dollars is 6% (annualized), what do you think is the 3-month sterling (U.K.) interest rate? Assume a 3-month forward rate of $1.823 = 1£. Explain what would happen if the rate were substantially above your figure.

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Exchange Rate C$* Country Currency U$ Europe 1.376" Eurozone countries Euro (EUR or €) 1.507 Sweden Krona (SEK) 6.485 5.922 Switzerland Franc (CHF) .888 .811 Pound (GBP or £) 1.668" United Kingdom 1.826 Americas Real (BRL) Brazil 2.188 2.396 Dollar (CAD) Canada 1.095 1.000 Mexico New peso (MXN) 12.083 13.231 Asia/Africa Australia Dollar (AUD) 107.ו 1.11 China Yuan (CNY) 6.067 5.541 Dollar (HKD) China (Hong Kong) 7.082 7.755 India Rupee (INR) 2.180 1.991 Yen (JPY or v) Japan 93.461 102.340 Rand (ZAR) South Africa 10.872 9.929 Won (KRW) South Korea 1,065.500 973.059