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Suppose that you are a US firm and the current exchange rate between the US dollar and the pound is $$1\mathrm{.}23$ per pound. Assume that the one year interest rate in the UK is $2\%$ and the one year interest rate in the US is $3\%.$ What is the one year forward rate?

What if forward rate $$$$1\mathrm{.}24206?$ For example, Forward rate $=$$$1\mathrm{.}22$

Demonstrate Arbitrage