ilil 1 Normal 1 No Spac.. Heading 1 Heading 2 Title Paragraph Styles Moving abroad London or Paris has always been a tough choice. The cities are so different yet both attractive on their own. You have been offered and accepted a job in London. You will start a year from now. You are excited since you will have access to all that Europe has to offer. Immediately you begin doing research. You notice that the interest rate for 1 year Treasury bills (USA) is 1.758 while the similar rate from the Bank of England (England's central bank) is 0.15%. You can't fail to notice that Switzerland and the EURO area rates are lower at (-0.358) 0% respectively. (Yes Switzerland pays you to borrow (or charges you to accept deposits)) You go to MaBigant Credit Union and ask about exchange rates. They tell you that 1GBP is 1.3500 USD today and a one year forward can be bought for 1.3716. Also, given that you will likely spend time in Paris you ask about the Euro, 1EUR sells for 1.18USD on the spot You start looking online for a place to stay. Flats (apartments for rent) in Chelsea are more expensive than Boston but is ok because you will be close to everything! Furniture is an issue, shipping is out of the question, and however, there is a lamp you really, really like. It costs $500 in Boston and 650 in London. D Focus o ly ts fio Paragraph Styles 1) According to IRP, what should be the forward rate of the GBP one year from now? 2) Does IRP hold? 3) Is the GBP selling at a premium or discount? 4) According to PPP, how many USD does it take to buy one GBP. 5) Does PPP hold? 6) How much should the lamp cost in France? 7) Finally suppose you found 1,000 Swiss Franks in your closet. Assume that currently, 1 USD equals 1.05 Swiss francs. How much would that be in GBP ? I Focus o RI E lyje * 16 le ho num. $ % A 7 8 9 & (