You have $1,800,000 to invest, and have access to the following information: ...
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Finance
You have $1,800,000 to invest, and have access to the following information:
Current spot rate of pound
=
$1.30
90-day forward rate of pound
=
$1.28
Annual interest rate in United States
=
3%
Annual interest rate in Great Britain
=
4%
Considering what has been discussed in class, and using the most precise version of IRP, demonstrate whether covered interest arbitrage is possible for a 90-day investment. If so, what will be the amount of U.S. dollars you will have after 90 days? Explain all steps in detail while showing computations.
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