Currently, the spot exchange rate is 1.50 USD/GBP and the three-month forward exchange rate is 1.510 USD/GBP. The three-month interest rate is 5.0% per annum in the U.S. and 2.0% per annum in the UK. Assume that you can borrow as much as $1,500,000 or 1,000,000.

a/ What is the implied three-month U.S.per annuminterest rate? (round to 2 decimals in %)

b/ Does Interest Rate Parity hold?

c/ Determine the arbitrage profit (if any, otherwise type "0") and report it in the currency in which you borrow. Remember that you should have a three month investment horizon.

In______(fill in "USD" or "GBP"), the arbitrage profit is ______(round to the nearest currency unit)