The Yield on a 1-Year Bill in the U

question 19

Multiple Choice

The yield on a 1-year bill in the U.K. is 7%, and the present exchange rate is 1 pound = U.S. $1.65. If you expect the exchange rate to be 1 pound = U.S. $1.45 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is

• A) −6.7%.
• B) 3.2%.
• C) 8%.
• D) −5.97%.
• E) None of the options