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The interest rate is 3% on the dollar and 6% on the pound sterling. Also, the current spot rate is $1.6 = 1 and the

The interest rate is 3% on the dollar and 6% on the pound sterling. Also, the current spot rate is $1.6 = 1 and the one-year forward rate is $1.5 = 1. Is there an opportunity for covered interest arbitrage? If yes, what is the arbitrage profit in terms of a percentage?

Select one:

a. Yes, 1.74%.

b. Yes, 2.02%.

c. No.

d. Yes, 4.71%.

e. Yes, 3.87%.

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