Suppose the Interest Rate in the U

question 53

Multiple Choice

Suppose the interest rate in the U.K. is 4% for 90 days, the current spot rate is $2.00/£, and the 90-day forward rate is $1.96/£. If the covered interest rate differential is about zero, then the interest rate in the U.S. for 90 days is:

• A)6 percent.
• B)4 percent.
• C)3 percent.
• D)2 percent.

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Definitions:

P = MC

The condition where the price of a good equals its marginal cost, representing an equilibrium in perfect competition markets.

Technological Progress

The advancement in technology which increases production efficiency and leads to economic growth.

Demand for Labor

The total amount of labor that employers want to hire at various wage rates.

Marginal Revenue

The additional income earned by selling one more unit of a good or service.