Assume the Spot Rate for the British Pound Currently Is

question 13

Multiple Choice

Assume the spot rate for the British pound currently is £.6369 per $1. Also assume the one-year forward rate is £.6421 per $1. A risk-free asset in the U.S. is currently earning 3.2 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free British security?

• A) 4.18 percent
• B) 4.57 percent
• C) 3.67 percent
• D) 4.04 percent
• E) 4.92 percent

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Definitions:

Social Cognitive Theory

A theory in psychology that posits that learning occurs in a social context with a dynamic and reciprocal interaction of the person, environment, and behavior.

Cognitive Processes

Mental activities involved in acquiring, retaining, and using knowledge, such as perception, memory, language, and problem-solving.

Secondary Reinforcers

Stimuli that acquire their reinforcing properties through their association with primary reinforcers.

Archetypes

Universally recognized symbols, themes, or characters that recur across cultures and literature, often representing fundamental human experiences.