Question: Question 7 1 pts Use the following information to answer questions 7-8. The 1-year risk-free interest rate in the US is 5% and the 1-year

Question 7 1 pts Use the following information to answer questions 7-8. The 1-year risk-free interest rate in the US is 5% and the 1-year risk free interest rate in the UK. Is 8%. The current spot rate is 0.655/USD and the current 1-year forward rate is 0.640/USD. Which statement is correct? Covered interest rate arbitrage involves borrowing in Pounds and investing in USD. Covered interest rate arbitrage involves borrowing in USD and investing in Pounds. Covered interest rate arbitrage involves borrowing in USD and investing in USD. IRF als so covered interest rate arbitrage profit is not possible. Question 8 $ % Question 8 1 pts Use the following information to answer questions 7-8. The 1-year risk-free interest rate in the US is 5% and the 1-year risk free interest rate in the UK is BX. The current spot rate is 0.655/USD and the current 1-year forward rate is 0.640/USD. What is the covered interest rate arbitrage profit in USD that you will realize in one year if you can borrow today 1 million of whichever currency you decide to borrow in? USD 40.553 USD 25,954 USD 55,312 IRP holds so covered interest rate arbitrage is not possible Question 9 Assume you are a U.S. based foreign exchange trader at a major bank with US$ funds and you observe the following

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