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A bank in the US has noticed an interest rate differential in another country relative to the current exchange rates. They have decided to borrow
A bank in the US has noticed an interest rate differential in another country relative to the current exchange rates. They have decided to borrow dollars, convert them to British pounds, and invest in pound-denominated CDs. To take advantage of this arbitrage opportunity, the banks needs to
A. Buy dollars spot and buy pounds forwards
B. Buy pounds spot and buy pounds forward
C. Buy dollars spot and buy dollars forward
C. None of these choices are correct
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