Exhibit 11.1 Assume the Following

question 193

Multiple Choice

Exhibit 11.1 Assume the following:
(1) the interest rate on 6-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States;
(2) today's spot price of the pound is $1.50 while the 6-month forward price of the pound is $1.485.
-Refer to Exhibit 11.1.If U.S.investors cover their exchange rate risk,the extra return for the 6 months on the U.K.treasury bills is:

• A) 1.0 percent
• B) 1.5 percent
• C) 2.0 percent
• D) 2.5 percent

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