Imagine that the UK had an interest rate of 0.5% and the USA had an interest rate of 0.75%. Which of the following three statements is correct? Select one: O a. The Pound must be trading at a forward...

Extracted text: Imagine that the UK had an interest rate of 0.5% and the USA had an interest rate of 0.75%. Which of the following three statements is correct? Select one: O a. The Pound must be trading at a forward discount against the Dollar otherwise there would be arbitrage. Ob. This is not related to forward rates of exchange because forward rates are only to do with market expectations of exchange rate movements. The Pound must be trading at a forward premium against the Dollar otherwise there would be arbitrage. Previous page Next page