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FI ($/E) 4 1.9975 5% 16% 2.0000 where: re-annual interest rate on three-month US dollar commercial paper re-annual interest on three-month British-pound commercial paper S($/E)-number
FI ($/E) 4 1.9975 5% 16% 2.0000 where: re-annual interest rate on three-month US dollar commercial paper re-annual interest on three-month British-pound commercial paper S($/E)-number of dollars per pound, spot (umber of dollars per pound, three months forward On the basis of the precise criteria: a. In which commercial paper would you invest? b. In which currency would you borrow? c. How would you arbitrage? d. What is the profit from interest arbitrage per dollar borrowed
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