Suppose the interest rate on 1-year loans in the United States is 5% while in the United

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Suppose the interest rate on 1-year loans in the United States is 5% while in the United Kingdom the interest rate is 6%. The spot exchange rate is US$1.55/£ and the forward rate is US $1.54/£. In what country would you choose to borrow? To lend? Can you profit from this situation?
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Fundamentals of Corporate Finance

ISBN: 978-1259024962

6th Canadian edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim

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