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Based on the information in question 1 for the beginning of the year, use the international Fisher effect (IFE) theory to forecast the annual percentage change in the British pound's value over the year.

question 1 As an employee of the foreign exchange department for a large company, you have been given the following information:
Beginning of Year

Spot rate of £ ¼ $1.
rate of Australian dollar (A$) ¼ $.70
Cross exchange rate: £1 ¼ A$2.28
One-year forward rate of A$ ¼ $.71
One-year forward rate of £ ¼ $1.58004
One-year U.S. interest rate ¼ 8.00%
One-year British interest rate ¼ 9.09%
One-year Australian interest rate ¼ 7.00%

Determine whether triangular arbitrage is feasible and, if so, how it should be conducted to make a profit

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91767720

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