Suppose the interest rate (on an annual basis) on three-month Treasury bills is ten percent in London

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Suppose the interest rate (on an annual basis) on three-month Treasury bills is ten percent in London and six percent in New York, and the spot rate of the pound is $2.

a. How can a U.S. investor profit from uncovered interest arbitrage?

b. If the price of the three-month forward pound is $1.99, will a U.S. investor benefit from covered interest arbitrage? If so, by how much?

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International economics

ISBN: 978-8131518823

13th Edition

Authors: Robert J. Carbaugh

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Question Posted: Nov 14, 2012 03:36 AM

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Suppose the interest rate (on an annual basis) on three-month Treasury bills is ten percent in London

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a The US investor would purchase pounds on the spot marke...View the full answer

International economics

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