Suppose That the Effective Return to a U

question 9

Multiple Choice

Suppose that the effective return to a U.S.investor from buying a U.K.bond is 5.55%. Forward and spot exchange rates ($/£) are 2.10 and 2.00 respectively. The interest rate on the U.K.bond is most likely equal to:

• A)5.45%
• B)5.500%
• C)5.650%
• D)5.60%

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