Suppose the spot pound and the three-month forward pound are both selling for $2.00, while U.S. interest rates are 10 percent and British interest rates are 6 percent. Using covered-interest arbitrage...

Suppose the spot pound and the three-month forward pound are both selling for $2.00, while U.S. interest rates are 10 percent and British interest rates are 6 percent. Using covered-interest arbitrage theory, describe what will happen to the spot price of the pound, the three-month forward price of the pound, interest rates in the United States, and interest rates in the United Kingdom when arbitrageurs enter this market.