Question: Suppose that the U . S . dollar - pound sterling spot exchange rate equals $ 1 . 6 0 / , while the 3

Suppose that the U.S. dollar-pound sterling spot exchange rate equals $1.60/, while the 360-day forward rate is $1.64/. The yield on a one-year U.S. treasury bill is 9% and that on a one-year U.K. treasury bill is 8%.
a. Calculate the covered interest differential.

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