Assume the Following Information:​ You Have $1,000,000 to Invest

question 82

Multiple Choice

Assume the following information:​ You have $1,000,000 to invest:
Current spot rate of pound
=
$1) 60
90-day forward rate of pound
=
$1) 57
3-month deposit rate in U.S.
=
3%
3-month deposit rate in U.K.
=
4%
​
If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?

• A) ​$1,020,500
• B) ​$1,045,600
• C) ​$1,073,330
• D) ​$1,094,230
• E) ​$1,116,250

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Definitions:

Public Corporation

A company whose shares are traded freely on a stock exchange, owned by public investors, and subject to specific disclosure and regulatory requirements.

Transfer Agents

Organizations or individuals responsible for maintaining records of securities owners and managing the transfer of stock or bonds between parties.

Retained Earnings

Definition: The portion of a business's profits not distributed as dividends to shareholders but instead retained for reinvestment or to pay off debt.

Cash Dividend

A payment of earnings declared by a company's board of directors, distributed among shareholders in the form of cash.