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2. (Ch. 7) Covered Interest Arbitrage. Assume the following market quotes information: St=1.1100 in GBPUSD Ft,30-day=1.1115 in GBPUSD iGBP=0.75% iusD =3.75% T=30 days The 30

2. (Ch. 7) Covered Interest Arbitrage. Assume the following market quotes information: St=1.1100 in GBPUSD Ft,30-day=1.1115 in GBPUSD iGBP=0.75% iusD =3.75% T=30 days The 30 -day nominal interest rates above are quoted in annualized terms. Given these market quotes information, is covered interest arbitrage possible? (6 points) Design a covered arbitrage strategy and calculate its profits. (12 points)

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