You are considering uncovered interest arbitrage between the pound $($GBP$)$ and the US

dollar $($USD$).$ Data available to you is as follows:$-$

Funds available$=5$ million GBP

Spot Exchange Rate$=1\mathrm{.}3000$ USD per GBP

Spot exchange rate one year ago

GBP$=1\mathrm{.}2350$ USD per GBP

USD $3-$month interest rate$=2\mathrm{.}51\%$ per annum

GBP $3-$month interest rate$=0\mathrm{.}75\%$ per annum

Required

a$)$ Calculate the profit that would be made if the exchange rate remains at its current level in three months time?

b$)$ How would your answer differ if GBP continues to strengthen at the same rate as it has done over the previous year?

Give step by step solution with the accurate figure values.