Use the Information for the Question(s)below

question 24

Multiple Choice

Use the information for the question(s) below.
The current spot exchange rate,S,is $1.8862/£.Suppose that the yield curve in both countries is flat.The risk-free rate on dollars,r$,is 5.35% and the risk-free interest rate on pounds,r£,is 4.80%.
-Using the covered interest parity condition,the calculated three-year forward rate F3 is closest to:

• A)$1.8568/£.
• B)$1.9161/£.
• C)$1.8961/£.
• D)$1.8764/£.

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