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US Interest Rate 3.00% p.a. UK Interest Rate 4.00% p.a. Spot GBP/USD= $1.6248 Twelve Month Forward GBP/USD= $1.6221 Determine if an arbitrage exists and

US Interest Rate 3.00% p.a. UK Interest Rate 4.00% p.a. Spot GBP/USD= $1.6248 Twelve Month Forward GBP/USD= $1.6221 Determine if an arbitrage exists and if so, calculate the arbitrage profit. Assume you may borrow $25,000,000 or the equivalent amount of GBP.

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