Assume the Following Information:​ You Have $1,000,000 to Invest

question 82

Multiple Choice

Assume the following information:​ You have $1,000,000 to invest:
Current spot rate of pound
=
$1) 60
90-day forward rate of pound
=
$1) 57
3-month deposit rate in U.S.
=
3%
3-month deposit rate in U.K.
=
4%
​
If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?

• A) ​$1,020,500
• B) ​$1,045,600
• C) ​$1,073,330
• D) ​$1,094,230
• E) ​$1,116,250

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Definitions:

Petty Cash Fund

Petty cash fund is a small amount of cash kept on hand for making immediate payments for minor and incidental expenses.

Perpetual Inventory System

An inventory management system where inventory levels are updated in real-time or on a continuous basis following each purchase or sale transaction.

General Journal

A primary accounting record used to record all types of transactions and events in chronological order before they are posted to specific accounts.

Internal Control

Approaches and techniques employed by a business to protect the veracity of accounting and financial information, foster answerability, and inhibit dishonesty.