Exhibit 11.1 Assume the Following

question 39

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.
-Assume that you are the Chase Manhattan Bank of the United States,and you have 1 million Swiss francs in your vault that you will need to use in 30 days.Moreover,you need 500,000 British pounds for the next 30 days.You arrange to loan your francs to Barclays Bank of London for 30 days in exchange for 500,000 pounds today,and reverse the transaction at the end of 30 days.You have just arranged a:

• A) Forward contract
• B) Futures contract
• C) Spot contract
• D) Currency swap

---

Definitions:

Torts and Contracts

Legal concepts where torts refer to civil wrongs causing harm or injury for which the law provides remedies, and contracts refer to agreements between parties creating mutual obligations enforceable by law.

Capacity To Enter

The legal ability of a person to enter into a binding contract, typically requiring that the person is of legal age and sound mind.

Contracts Limited

Presumed to be a specific entity, but in general terms, it could relate to agreements that have certain limitations or restrictions imposed on them.

Weakened Intellect

A condition or state where an individual's cognitive abilities are significantly below average, affecting their decision-making capabilities.