The spot exchange rate is $1.30 per pound. The one year ahead forward rate is...
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The spot exchange rate is $1.30 per pound. The one year ahead forward rate is $1.35 per pound. If the interest rates are 4% in US and 2% in UK what will be the profit earned by an investor who borrows $1,000 dollars and invests for one year in a pound denominated bond? Assume the investor uses the forward contract to convert the pounds back to dollars at the forward rate. Report the answer rounded to two decimal places without the currency symbol.
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