You have $4,000. The current interest rates on dollar- and pound-denominated deposits for 180-day maturity are i
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You have $4,000. The current interest rates on dollar- and pound-denominated deposits for 180-day maturity are i$=0.02 and i=0.03, respectively. The current spot exchange rate is e=$2/. Assume that you don't mind bearing foreign exchange risk. You expect the spot rate in 180 days to be $1.90/. What strategy would you follow, and why? After 180 days, the actual spot rate turns out to be $1.80/. Are you pleased with your decision? Why or why not?
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