2. You have been given the following information:

On the basis of the precise criteria:

a. In which commercial paper would you invest?

b. In which currency would you borrow?

c. How would you arbitrage?

d. What is the profit from interest arbitrage per dollar borrowed?

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5% 6% S($/) 2.0000 where: r = annual interest rate on three-month US dollar commercial paper r = annual Interest on three-month British-pound commercial paper S($/) = number of dollars per pound, spot F($/) = number of dollars per pound, three months forward F($/) 1.9975