Assume That Interest Rates Are Zero and the Spot Rate

question 60

Multiple Choice

Assume that interest rates are zero and the spot rate in the forex market is £1 = $1. If a speculator expects the spot rate at the end of three months to be £1 = $1.25, then which of the following will allow him to make a profit?

• A) He converts dollars into pounds now and invests it in a time deposit in a UK bank.
• B) He converts pounds into dollars now and invests it in a time deposit in an American bank.
• C) He takes a loan in dollars now, converts it into pounds, reconverts it into dollars at the end of three months and repays the loan.
• D) He takes a loan in pounds now, converts it into dollars, reconvert into pounds at the end of

---

Definitions:

Critical Periods

Specific times during development when the brain is particularly receptive to acquiring certain types of information or skills.

Horizontal Lines

Lines that run parallel to the horizon or ground level, often used in art and design to suggest stability or calm.

Vertical Lines

Lines that run up and down, perpendicular to the horizon, often used in art and design to convey strength, stability, and height.

Retinal Image

The image formed on the retina of the eye as a result of light reflecting off an object and entering the eye.