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Consider the following: Spot rate = 1.6400 $/pound sterling 90 day Forward rate = 1.6236 $/pound sterling U.S. risk free rate = 1.15% UK risk
- Consider the following:
- Spot rate = 1.6400 $/pound sterling
- 90 day Forward rate = 1.6236 $/pound sterling
- U.S. risk free rate = 1.15%
- UK risk free rate = 3.75%
- Does IRP hold?
- If not, show how much profit can be earned by covered interest arbitrage? Use $1,000,000 or 1,000,000.
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