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Problem 1.25. Suppose that USD-sterling spot and forward exchange rates are as follows: Spot 1 55 80 90-da orwara' I .5556 ISO-dayfonvard 1 .5518 What

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Problem 1.25. Suppose that USD-sterling spot and forward exchange rates are as follows: Spot 1 55 80 90-da orwara' I .5556 ISO-dayfonvard 1 .5518 What opportunities are open to an arbitrageur in the following situations? (a) A ISO-day European call option to buy 1 for $1.52 costs 2 cents. (b) A 90-day European put option to sell 1 for $1 .59 costs 2 cents

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