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Spot rate of pound $1.60 90-day forward rate $1.5385 90-day US interest rate 2% 90-day UK interest rate 4% 1. According to the interest rate
Spot rate of pound $1.60 90-day forward rate $1.5385 90-day US interest rate 2% 90-day UK interest rate 4% 1. According to the interest rate parity, what 90-day forward rate of pound should be? 2. What is the net profit from the proper covered interest arbitrage? 3. Which interest rate will go up after the covered interest arbitrage? 4. Which one, forward rate or spot rate, will go up after the covered interest arbitrage?
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