Assume the following informationspot rate of canadian, Ask an Expert

Finance

Assume the following information:

Spot rate of Canadian Dollar £0.4400

90 day forward rate of Canadian Dollar £0.4345

90 day Canadian interest rate -4%

90-day U.K interest rate - 2.5%

Required

a) Show the IRP does not hold.

b) Assume a U.K investor has £100,000. Determine the excess returns she would earn if she engaged in covered interest arbitrage than if she invested in her country.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92852547

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