31 Interest Rates and Arbitrage The treasurer of a major British firm has £30 million to invest for three months.

The annual interest rate in the United Kingdom is 0.45 per cent per month. The interest rate in the Eurozone is 0.6 per cent per month. The spot exchange rate is €1.12/£, and the three-month forward rate is €1.15/£. Ignoring transaction costs, in which country would the treasurer want to invest the company’s funds? Why?