Suppose the British pound (GBP) is pegged to the euro

Suppose the British pound (GBP) is pegged to the euro (EUR). You think there is a 5% probability that the GBP will be devalued by 10% over the course of the next month. What interest differential would prevent you from speculating by borrowing GBP and lending EUR?

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  • CreatedMay 28, 2012
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