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The spot exchange rate is $1.75 / E, and the tweive-month forward exchange rate is $1.68/E. The annual interest rates are 7.056 in the US

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The spot exchange rate is $1.75 / E, and the tweive-month forward exchange rate is $1.68/E. The annual interest rates are 7.056 in the US and 12% in the UK Assume that you can borrow as much as $1,000,000 or an equivalent in British pounds. 1. Determine whether the interest rate parity is currently holding. 2. If the IRP is not holding. Where would you borrow to carry out covered interest arbitrage? 3. Determine the arbitrage profit. Eadit View insert Format Took Tible

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