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QUESTION 3 Currently, the GBP/USD rate is 1.5036 and the three-month forward exchange rate is 1.5233. The three-month interest rate is 7.4% per annum in

QUESTION 3

Currently, the GBP/USD rate is 1.5036 and the three-month forward exchange rate is 1.5233. The three-month interest rate is 7.4% per annum in the U.S. and 4.5% per annum in the U.K. Assume that you can borrow 1,000,000 or its equivalent in USD. How much do you make/lose if you borrow the local currency and invest abroad? (USD, no cents)

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