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Given the following: The UK inflation rate is expected to decline, while the US inflation rate is expected to rise. British interest rates are expected
Given the following: The UK inflation rate is expected to decline, while the US inflation rate is expected to rise. British interest rates are expected to rise, while US rates are expected to fall. a) Using the above information, do you expect, the pound to appreciate or depreciate inthe future? Explain. (b) Explain how you can hedge the above exchange risk using forward contracts, money market hedge and currency options
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