(4 points) The current exchange rate for GBP is $1.30 per GBP. Risk free interest...
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(4 points) The current exchange rate for GBP is $1.30 per GBP. Risk free interest rates for USD and GBP are 1.6% and 1% per year, respectively (continuous compounding). You may enter a zero cost forward contract with a bank to buy or sell 1 million GBPs at $1.30151 per GBP in 6 months. Construct an arbitrage strategy and show that it's an arbitrage
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