An Indian importer has three months payable of GBP 1,200,000. The GBP/INR spot and forward rates available today in the market are as follows:

Spot: 91.4045: Imf; 10/14: 2mf:

15/20;

The prevailing interest rates are as follows

USA: 3% 3.5%: INDIA: 6%-7%

3mf: 25/30; 6mf: 13/10

If expected GBP/INR Spot after 3 months 91.7580 then suggest rational strategy to the importers between forward hedging fund money market hedging

Also suggest that whether interest rate purity is currently holding or not based on following information Spot: 1.50: 3ml: $1.52/: 3-month interest rate is 8.0 % in the U.S. und 5.8% in the U.K. Assume that you can borrow as much as $1.500,000 or 1,000,000. Determine. If IRP is not holding, how would you carry out covered interest arbitrage? Show all the steps and determine

the arbitrage profit