. Rima wants to earn riskless arbitrage profit in the forex market. She borrowed USD 100,000 at 4% interest and invested in UK (GBP) at 6% for 1 year. The spot exchange rate is 0.7304 GBP /USD and the 1year forward exchange rate is 0.7485 GBP/USD. What is the possibility for Rima to earn arbitrate profit in the given situation?

a.

Rima can earn profit through arbitrage as she borrowed 100,000 USD at lower interest rate and invested in GBP at higher interest rate

b.

Rima cant earn profit by borrowing100, 000 USD and investing in GBP as forward premium/discount is greater than interest rate difference.

c.

Rima can earn profit by borrowing 100,000 USD and investing in GBP as forward premium/discount is greater than interest rate difference.

d.

None of the option is correct