Suppose the annual interest rate is 5% in the US and 8% in the UK, and that the spot exchange rate is $1.50/ and the forward exchange rate, with one year maturity, is $1.48/ Is arbitrage possible; in other words does IRP hold? If it does not, how would you conduct arbitrage i.e., borrow home & invest abroad, or vice versa. Assume that you can borrow $1,000,000 or its equivalent, 666,667