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If S($/£) = $1.25/£; F360($/£)=$1.10/£; i$=7.04%; if=11.50%, to hedge foreign ex interest arbitrage: £-based investors should buy GBP in the forward market O £-based investors should buy USD in the forward market O $-based investors should buy GBP in the forward market $-based investors should buy USD in the forward market

If S($/£) = $1.25/£; F360($/£)=$1.10/£; i$=7.04%; if=11.50%, to hedge foreign ex interest arbitrage: £-based investors should buy GBP in the forward market O £-based investors should buy USD in the forward market O $-based investors should buy GBP in the forward market $-based investors should buy USD in the forward market

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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If S($/£)=$1.25/£; F360($/£)=$1.10/£; i$=7.04%; if=11.50%, to hedge foreign exchange risk involved in doing interest arbitrage: O £-based investors should buy GBP in the forward market O £-based investors should buy USD in the forward market O $-based investors should buy GBP in the forward market O $-based investors should buy USD in the forward market
Transcribed Image Text:If S($/£)=$1.25/£; F360($/£)=$1.10/£; i$=7.04%; if=11.50%, to hedge foreign exchange risk involved in doing interest arbitrage: O £-based investors should buy GBP in the forward market O £-based investors should buy USD in the forward market O $-based investors should buy GBP in the forward market O $-based investors should buy USD in the forward market
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