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Currently, the spot exchange rate is $1.58/ and the three-month forward exchange rate is $1.60/. The interest rate is 8 percent per annum in the

Currently, the spot exchange rate is $1.58/ and the three-month forward exchange rate is $1.60/. The interest rate is 8 percent per annum in the U.S. and 5.8 percent per annum in the U.K. Assume that you can borrow as much as $1,580,000 or 1,000,000.

a. Determine whether interest rate parity is currently holding.

multiple choice

Yes

No

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