#9

IRP arbitrage2 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 $1.5726/61, and Interest rate parity holds, what must be the one-year forward exchange rate? (Do not round Intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616)) One-year forward exchange $ rate per & b. If the forward rate is actually $1.5419/61, would you borrow in dollars or pounds to make an arbitrage profit? O Dollars O Pounds c. If you can borrow either $1 million or $1 million (borrow in currency Identified in previous part) to capitalize on the arbitrage profit using the actual forward rate of $1.5419/61, what is your arbitrage profit at the end of the year expressed in Sdollars? (Do not round Intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616)) Arbitrage profit in $ Noy