Inberest rate parity

STEP: $3$ of $3$ of the pound is $1\mathrm{.}25.$ the interest rates are the same as they have been throughout this problem. of $5\%,$ your deposit grows to $420,000$ pounds.

When you convert your $420,000$ pounds back to dollars, you end up with approximately for a profit of about over your original $$500,000.$

However, had you simply deposited your $$500,000$ in an account and accrued $2\%$ interest, you would have $,$ for a profit of

This example illustrates that covered interest arbitrage offer a significantly larger return than simply depositing the funds in a domestic account under interest rate parity.

TOTAL SCORE: $\frac{0}{5}$

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