Where would you lend

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Consider the following information:

rUS= 4%; rUK= 7%

E0= 2.00 dollars per pound

F0=1.98(1-year delivery)

where the interest rates are annual yields on U.S. or U.K. bills.

Given this information:

a. Where would you lend?

b. Where would you borrow?

c. How could you arbitrage?

Reference no: EM13895173

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