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QUESTION
rUS=7%; rUK=8% (these are annual yields);E0=1.60 dollars per pound; F0=1.58 (1 year delivery). a) Where should you lend? b) Where should you borrow?
rUS=7%; rUK=8% (these are annual yields);E0=1.60 dollars per pound; F0=1.58 (1 year delivery).
a) Where should you lend?
b) Where should you borrow?
c) If you invest in the UK, using futures or forwards to cover interest rate risk, what US equivalent (rUS) return are you able to achieve for the year?
