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8-8 a. If the Interest rate In the United Kingdom is 6 percent, the Interest rate In the United States is 4 percent, the spot
8-8
a. If the Interest rate In the United Kingdom is 6 percent, the Interest rate In the United States is 4 percent, the spot exchange rate is $1.6012%1, and Interest rate parlty holds, What must be the one-year forward exchange rate? (Do not round intermedlate calculations. Round your answer to 4 decimal places. (e.g. 32.1616)) b. If the forward rate is actually $1.5724A1, would you borrow in dollars or pounds to make an arbltrage profit? Dollars Pounds c. If you can borrow elther $1 million or 1 million (borrow in currency identified in previous part) to capltalize on the arbitrage profit using the actual fonvard rate of $1.57241, what is your arbltrage profit at the end of the year expressed in \$clollars? (Do not round intermedlate calculations. Round your answer to 4 decimal places. (e.g. 32.1616))Step by Step Solution
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