The Spot Rate for the British Pound Currently Is $\le$ 5086 Per $1

question 14

Multiple Choice

The spot rate for the British pound currently is $\le$ .5086 per $1. The one-year forward rate is $\le$ .4975 per $1. A risk-free asset in the U.S. is currently earning 4 %. If interest rate parity holds, what rate can you earn on a one-year risk-free British security?

• A) 1.73 %
• B) 2.28 %
• C) 4.27 %
• D) 6.32 %
• E) 6.49 %

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Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished products.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all units available for sale.

Equivalent Units Of Production

A concept in cost accounting used to allocate costs to partially completed goods, based on the amount of work done on them.

Equivalent Units Of Production

A calculation used in the production process to equate the amount of work done on partially finished goods to the quantity of completed goods.