Suppose the Exchange Rate Between US Dollars and British Pound

question 32

Multiple Choice

Suppose the exchange rate between US dollars and British pound is US$1.50 = BP1.00. If the interest rate is 6% per year what is the adjusted price of the British pound when valuing a foreign currency option with an expiration of one year? (Approximately)

• A) $1.905
• B) $1.4151
• C) $0.7067
• D) None of the above

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Definitions:

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A decade characterized by industrial, economic, and social developments, including the aftermath of the Franco-Prussian War and the beginning of the Second Industrial Revolution.

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