The Spot Rate for the British Pound Currently Is £

question 198

Multiple Choice

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

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

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