Suppose that USD/sterling spot and forward exchange rates are as follows: What opportunities are open to an
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Suppose that USD/sterling spot and forward exchange rates are as follows:
What opportunities are open to an arbitrageur in the following situations?
(a) A 180-day European call option to buy \(£ 1\) for \(\$ 1.42\) costs 2 cents.
(b) A 90-day European put option to sell \(£ 1\) for \(\$ 1.49\) costs 2 cents.
Transcribed Image Text:
Spot 90-day forward 180-day forward 1.4580 1.4556 1.4518
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