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(a) If interest rates in the U.S. and the U.K. are 4% and 2% respectively and the spot rate for dollar is 0.7750, what is

(a) If interest rates in the U.S. and the U.K. are 4% and 2% respectively and the spot rate for dollar is 0.7750, what is the 90-day equilibrium forward rate for US$? What is the forward premium/discount on US$?

(b) If the quoted (actual) forward rate for US$ is 0.7700, is there an opportunity for covered interest arbitrage?

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