Question
Given the spot rate equals $1.5/ and 8 month forward rate is $1.53/, if the positive interest rate differential in favor of UK is 3
Given the spot rate equals $1.5/ and 8 month forward rate is $1.53/, if the positive interest rate differential in favor of UK is 3 percent per year, explain how to do covered interest arbitrage for 8 month investment. *
2 points
a,Outflow to UK. To transfer fund to UK, sell pound sterling in spot market and buy pound sterling in forward market.
b.Inflow to US. To invest in US, sell pound sterling in spot market and buy pound sterling in forward market.
c.Inflow to US. To invest in US, buy pound sterling in spot market and sell pound sterling in forward market.
d.Outflow to UK. To transfer fund to UK, purchase pound sterling in spot market and sell pound sterling in forward market.
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Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Arshad Ahmad, Jordan Fortino
6th Canadian edition
1259453146, 978-1259453144
