Multiple choice:

Given that the quoted forward exchange rate for British pounds is $1.65, one can generate a riskless profit by engaging in covered interest arbitrage if the forward exchange rate implied by IRP is $1.67. The correct steps to take advantage of this price discrepancy should include the following:

a. Convert US dollars into British pounds at the spot market and invest in Britain.

b. Convert British pounds into US dollars at the spot market and invest in the U.S.

Which one?