Problem 3 ( 15 Points ) Suppose the spot exchange rate between the U S dollar and the British pound is 1 5492 $ , the interest rate on a three month U S financial instrument 1 24 percent, and the interest rate on a similar U K financial instrument is 3 66 percent Rewrite the uncovered interest parity equation to show how it is a guide for the future spot rate Based on the given information, calculate the implied expectation of the spot rate between the U S dollar and the British pound

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Question: Problem 3: ( 15 Points ) Suppose the spot exchange rate between the U.S. dollar and the British pound is 1.5492 $/, the interest rate

Problem 3: ( 15 Points )

Suppose the spot exchange rate between the U.S. dollar and the British pound is 1.5492 $/, the interest rate on a three-month U.S. financial instrument 1.24 percent, and the interest rate on a similar U.K. financial instrument is 3.66 percent.

Rewrite the uncovered-interest-parity equation to show how it is a guide for the future spot rate.

Based on the given information, calculate the implied expectation of the spot rate between the U.S. dollar and the British pound.

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