Forward discount, that is, pound discount, forward dollar appreciation, because the spot pound interest rate is relatively low, and pound discount, that is, the currency with high interest rate will appreciate in the future, that is, arbitrageurs can get the spread and exchange rate changes at the same time.
(2) According to the above analysis, investing in new york market is beneficial to pound holders. Assuming that the exchange rate remains unchanged, it will be converted into US dollars immediately, invested for three months, and then converted into US dollars after recovery. After deducting the opportunity cost of British pound investment, regardless of the buying price and selling price, the yield profit is 2%, that is, 100000*2%/4=500 pounds.
(3) Investors use swap transactions to avoid foreign exchange risks. Spot pounds are converted into dollars and invested for three months. At the same time, they sell the three-month investment principal and interest forward of dollars. At maturity, the principal and interest of the US dollar investment will be recovered and the forward contract will be performed. After the sale, the pound is earned, MINUS the opportunity cost of the pound investment, which is the net income:
100000 * 1.6025 * ( 1+8%/4)/ 1.60 15- 100000 * ( 1+6%/4).