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Please do A B and C Today's spot rate is GBP/USD=1.7502. The 6 months US interest rate is 4.75% and the 6 month UK interest
Please do A B and C
Today's spot rate is GBP/USD=1.7502. The 6 months US interest rate is 4.75% and the 6 month UK interest rate is 3.15%. (Annual compounding for interest rates) a) What is the 6 month forward on GBP USD? b) You need to exchange 2mil GBP in 6 month and want to lock-in the rate today. Would you be buying or selling the GBP/USD forward? c) You observe the 6 months forward to be 1.8000. What arbitrage opportunities are there? Show all the trades and cash-flows if you want to lock in profit in USD dollars. Use 100mil USD as notionalStep by Step Solution
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