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The current exchange rate for GBP is $1.3050 per pound. 1-year risk free interest rates for USD and GBP are 0.8% and 1.2% per year,
The current exchange rate for GBP is $1.3050 per pound. 1-year risk free interest rates for USD and GBP are 0.8% and 1.2% per year, respectively, with continuous compounding. 1-year European 1.30-call and 1.30-put option prices are $0.048 and $0.030, respectively. Construct an arbitrage strategy and show that its an arbitrage.
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