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QUESTION-2: Suppose the 12-month forward price of the pound in terms of C$1.5 per pound. Suppose the spot price of the pound in terms of

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QUESTION-2: Suppose the 12-month forward price of the pound in terms of C$1.5 per pound. Suppose the spot price of the pound in terms of CS 1.4 per pound. Next, suppose that currently the annual interest rate in Canada is 3%, while the annual interest rate in Britain is 5%. There are no transactions costs i.e. broker commission etc. Is there an arbitrage opportunity here? If so, explain exactly how you would take advantage of this situation to make riskless profits

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