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Use the following information. The interest rate in the US market (home market) = 10% The interest rate in the UK market (foreign market) =

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Use the following information. The interest rate in the US market (home market) = 10% The interest rate in the UK market (foreign market) = 15% Today's spot exchange rate is: 1 BP (British pound) = $1.17. Today's forward exchange rate is: 1 BP = $1.15 a) Does the IRP (interest rate parity) hold? Show your work. (5 pts) b) If you invest $1,800 in the UK market for a year and use the forward contract to buy back US dollars in a year, what is your 1-year dollar return? (15 pts)

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