Sader is a foreign exchange dealer for a bank in Manchester. He has 2,000,000 (or its

Singapore dollar equivalent) for a short-term money market investment. He wonders if he

should invest in pounds sterling or make a covered interest arbitrage investment in the

Singapore dollar. He faces the following rates.

Spot exchange rate S$2.9880/

3-month forward rate S$3.0000/

3-month UK interest rate 3%p.a.

3-month Singapore interest rate 5%p.a.

Which country's money market do you recommend Sader to invest? Why? Calculate the arbitrage profit or loss in ?