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If the spot exchange rate between dollars and pounds is equal to 2 dollars for one pound and the forward exchange rate equals 2 .

If the spot exchange rate between dollars and pounds is equal to

2

dollars for one pound and the forward exchange rate equals

2.10

dollars for one pound, then

the dollar is trading at a forward premium.

the pound is trading at a forward discount.

the pound is trading at a forward premium.

the market presents an opportunity for arbitrage.

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