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QUESTION 2 Use the following information to answer the next three questions A British money manager observes that the one-year interest rate is 8 percent
QUESTION 2 Use the following information to answer the next three questions A British money manager observes that the one-year interest rate is 8 percent in the United Kingdom and 10 percent in the US. The current spot exchange rate is $1.05/. What should be the one year forward rate according to IRP? Assume the UK is the domestic nation. Round intermediate steps to four decimals. O 1,0309/S O 9351/S O .97/$ 1,0694/5 QUESTION 3 If the actual forward rate is .96/$, find the percentage return available to this investor via covered interest arbitrage. Round intermediate steps and your final answer to four decimals and enter your answer in decimal format (EX: XXXX)
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