Consider the follo wing informa tion:

r US 5%

r UK 7%

www.mhhe.com/bkm 19 Globalization and International Investing 647 E 0 2.0 dollars per pound F 0 $1.97/£ (one -year de livery)

where the interest rates are annual yields on U.S. or U.K. bills. Given this information,

a. Where would you lend?

b. Where would you borrow?

c. How c ould you a rbitrage?

Challenge

 LO.1