If the Interest Rate Is Higher in the United States

question 90

Multiple Choice

If the interest rate is higher in the United States than in the United Kingdom, and if the forward rate of the British pound (in U.S. dollars) is the same as the pound's spot rate, then:

• A) U.S. investors could possibly benefit from covered interest arbitrage.
• B) British investors could possibly benefit from covered interest arbitrage.
• C) neither U.S. nor British investors could benefit from covered interest arbitrage.
• D) U.S. investors could possibly benefit from covered interest arbitrage AND British investors could possibly benefit from covered interest arbitrage.

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