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Assume that Spot USD/GBP (Cable) = 1.3 One year GBP interest, r domestic = 2% One year USD interest, r foreign = 3% i) Calculate

Assume that Spot USD/GBP (Cable) = 1.3 One year GBP interest, r domestic = 2% One year USD interest, r foreign = 3%

i) Calculate the one year USD/GBP FFX Rate

ii) Calculate the forward points, is the forward rate at a premium or discount to the spot rate?

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