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3) The spot USD /GBP rate is 1.5711 . The 1 year t-bill rate in the US is .19%. The 1 year rate in the
3) The spot USD /GBP rate is 1.5711 . The 1 year t-bill rate in the US is .19%. The 1 year rate in the UK is 0.39%. a) Calculate the 1 year USD/GBP 1 year forward rate. b) If the observed 1 year forward rate is 1.60USD/GBP, is there an arbitrage opportunity? How would you take advantage of this? Show all your transactions and steps
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