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The nine-month interest rates in United Kingdom and the United States are .3% and .2% per annum, respectively, with continuous compounding. The spot price of
The nine-month interest rates in United Kingdom and the United States are .3% and .2% per annum, respectively, with continuous compounding. The spot price of the British pound is $1.33. The forward price for a contract deliverable in nine months is $1.43. What arbitrage opportunities does this create?You must be very specific with your strategy and guaranteed gain in order to receive full points.
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