Spot Rate $1.30/GBP Forward Rate (3 month) $1.25/GBP UK Interest Rate (annualized) 12% USA Interest Rate (annualized)
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Question:
Spot Rate
$1.30/GBP
Forward Rate (3 month)
$1.25/GBP
UK Interest Rate (annualized)
12%
USA Interest Rate (annualized)
16%
Calculate the arbitrage profit assuming that you start with either $1,300,000 or GBPl , 1,000 , 000?
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