A) The spot price of the British pound is currently $2.00. If the risk-free interest rate on 1-year Government bonds is 4% in the United States and 6% in the United Kingdom,

what must be the forward price of the pound for delivery 1 year from now?

Assume that the spot price of gold is $1,500 per troy ounce, the risk-free interest rate is 2%, and

storage and insurance costs are zero.

b) What should be the forward price of gold for delivery in 1 year?

c) If the futures price is $1550, develop a strategy that can bring risk-free arbitrage profits.

d) Calculate the profit that you can make by following that arbitrage strategy.