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Question: you observe that the uk annual interest rate is 25...

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You observe that the U.K. annual interest rate is 2.5 percent, the U.S. annual interest rate is 3.8 percent, the 3-month forward rate is $1.8180/E, and the spot rate is $1.8034/t. Assuming that transaction costs are 0.2 percent, are the financial markets in equilibrium?
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