Value of pound in $ $1.60 Value of C$ in $ $0.80 Value of pound in C$ C$1.90 1. Which currency is overpriced? 2. What is the net profit from the triangular arbitrage? 3. Which price(s) will increase after the triangular arbitrage?

4. Which price(s) will decrease after the triangular arbitrage? Spot rate of pound $1.60 90-day forward rate $1.60 90-day US interest rate 2% 90-day UK interest rate 4% 1. According to the interest rate parity, what 90-day forward rate of pound should be? 2. What is the net profit from the proper covered interest arbitrage? 3. Which interest rate will go down after the covered interest arbitrage? 4. Which one, forward rate or spot rate, will go down after the covered interest arbitrage?