1. Suppose that Britain and U.S. interest rates are iux -0.04 and is=0.03 respectively for...
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1. Suppose that Britain and U.S. interest rates are iux -0.04 and is=0.03 respectively for 90 days, and that the spot exchange rates are $2.00/ while the forward rates are $1.96/. A New York arbitrageur begins with $20 million. Answer the following questions: (1) Is there any opportunity for the arbitrage? (2) What happens if many people take advantage of an opportunity for interest arbitrage
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