you are given the following case: Interest rate in U.S. is 6%, interest rate in Britain is 11%, the spot rate of the pound is $1.30, and the forward rate is $1.60. Given the information, we canconcudethat:

IRP does not hold and the spot and forward rates must fall

IRP does not hold and the spot rate should fall and forward rate should increase.

IRPholdsandthere is no possibility for interest rate arbitrage.

IRP does not hold and the spot rate should increase and forward rate should fall.

IRP does not hold and the spot and forward rates must increase.