Assume the Following Information: ​

question 33

Multiple Choice

Assume the following information: ​
Current spot rate of Australian dollar = £0.40
Forecasted spot rate of Australian dollar 1 year from now = £0.37
1-year forward rate of Australian dollar = £0.38
Annual interest rate for Australian dollar deposit = 9%
Annual interest rate in the UK = 6%
​
Given the information in this question, the return from covered interest arbitrage by UK investors is ______%.

• A) 3.00
• B) 4.15
• C) 2.33
• D) 1.14
• E) 3.55

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Definitions:

Work in Process Inventory

Work in Process Inventory represents the cost of incomplete goods in the manufacturing process, including labor, raw materials, and overhead costs.

Equivalent Units

A concept used in cost accounting to express the amount of work done by various units of production collectively, taking into account both complete and partially complete units.

Direct Labor

The wages and other costs for labor directly involved in the production of goods or provision of services.

Weighted Average Method

An inventory valuation method where costs of goods sold and ending inventory are determined by taking the weighted average of all units available for sale during the period.