question archive An investor notes the following: Spot Exchange Rate: $1
An investor notes the following: Spot Exchange Rate: $1
Subject:AccountingPrice: Bought3
An investor notes the following: Spot Exchange Rate: $1.50/? 60-day Forward Exchange Rate: $1.47/? 120-day Forward Exchange Rate: $1.45/? Annualized Interest Rates 60-day 120-day U.S. 4% 4.5% U.K. 5% 5.6% Assume that no-arbitrage 120-day forward price is $1.4948/?. After borrowing GBP, identify the most appropriate arbitrage transactions to earn an arbitrage profit from the misvaluation of the forward contract. Sell Buy
a. USD for GBP forward USD for GBP spot
b. USD for GBP spot USD for GBP forward
c. USD for GBP forward GBP for USD spot
d. USD for GBP spot GBP for USD forward
