(1) Because the three-month spread is 30-50, (after > before), the forward pound premium.

1=$ 1.6025+0.0030= 1.6055

1= 1.6035+0.0050= 1.6085

So March forward exchange rate? 1=$ 1.6055/ 1.6085

(2) According to the interest rate parity theorem, rh-rf=(f 1-eo)/e0.

Therefore, the annual insurance rate of the pound =8%-6%=2%.

(3) According to the interest rate parity theorem

Suppose you have 1 10,000 pounds and invest directly in the London market. Profit after one year = 100 * 6% = 60000.

But if your 6.5438+0 million pounds are converted into dollars to invest in the new york market, then

(1 ten thousand/1.6025) * (1+8%) * 3% = 20218.4.

So I borrowed money in new york and invested in London.

How did 3% come from? I think so too. According to the second question, (f 1/e0)- 1=2%, so f 1/e0=3%.

I'm not sure about the second question, because the three-month premium is easy to get, but I can only think of the interest rate parity for the annual premium rate ~ ~ Please correct me if there is any mistake! thank you