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Business, 14.11.2019 04:31 jeremyrs101

The spot usd /gbp rate is 1.5711. the1 year t-bill rate in the us is .19%. the 1 year rate in the uk is 0.39%.
a) calculate the 1 year usd/gbp 1 year forward rate.
b) if the observed 1 year forward rate is 1.60 usd/gbp, is there an arbitrage opportunity? how would you take advantage of this? show all your transactions and steps.

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