Use Interest Rate Parity to Answer This Question

question 59

True/False

Use interest rate parity to answer this question. A U.S. investor has a choice between a risk-free one-year U.S. security with an annual return of 4%, and a comparable British security with a return of 5%. If the spot rate is $1.43/£, the forward rate is $1.44/£, and there are no transaction costs, the investor should invest in the U.S. security.

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Definitions:

Physical Skills

Abilities related to the control and coordination of bodily movements, often developed through practice or exercise.

Standing Alone

The state or condition of being isolated, independent, or not influenced or supported by others.

Walking

A form of locomotion involving two legs that move one at a time, allowing humans and other bipeds to move efficiently on the ground.

Sense

The physiological capacity of organisms to obtain information from their environment through sensory organs.