he 1-year risk-free interest rate in the U.S is 5% and the 1-year risk free...
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he 1-year risk-free interest rate in the U.S is 5% and the 1-year risk free interest rate in the U.K. is 7%. The current spot rate is 0.655/USD and the current 1-year forward rate is 0.640/USD. Does IRP hold? If not, if you can borrow 1 million of either currency, what is the covered interest rate arbitrage profit?
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