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Question 3 (10 points 3+7) Suppose that the spot GBP/EUR rate is So 1.2, and the 3 year risk free interest rates are [EUR =2%

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Question 3 (10 points 3+7) Suppose that the spot GBP/EUR rate is So 1.2, and the 3 year risk free interest rates are [EUR =2% and rGBP = 3%. What is the 3 year forward exchange rate, also written as oF3? Show that arbitrage is not possible assuming that you could alternately invest in the bank using the spot rates provided

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