Suppose you observe a spot exchange rate of $1.7/. If interest rates are 4% in the US and 1.5 % in the UK, what is the no-arbitrage 1-year forward rate?

1.62

1.65

1.78

1.74

2.A businessman has just completed transactions in Italy and England. He is now holding 20000 and 150,000 and wants to convert to U.S. dollars.

His currency dealer provides this quotation:

USD/GBP1.2500- 04

EUR/USD0.8884- 0.8888

What are his proceeds from conversion?

210072

137737

210002

137729