The spot rate between the UK and the U.S.is £0.6789 = $1,while the one-year forward rate is £0.6782 = $1.The risk-free rate in the UK is 3.1 percent.The risk-free rate in the U.S.is 2.9 percent.How much profit can you earn on a loan of $2,000 by utilizing covered interest arbitrage?
A) -$4.09
B) -$2.78
C) $3.15
D) $6.13
E) $8.55
Correct Answer:
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