Solved: Problem based on loans in the united states, Finance Basics

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Problem based on loans in the united states

Question:

Suppose the interest rate on 1-year loans in the United States is 3 percent while in the United Kingdom the interest rate is 5 percent. The spot exchange rate is $1.87/£ and the 1-year forward rate is $1.84/£. In what country would you choose to borrow? To lend? Can you profit from this situation?

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Finance Basics: Problem based on loans in the united states

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