Assume the Spot Rate for the British Pound Is Currently

question 45

Multiple Choice

Assume the spot rate for the British pound is currently £.1.5604 while the 1-year forward rate is £1.5587.A risk-free asset in the United States is currently earning 2.6 percent.If interest rate parity holds,approximately what rate can you earn on a 1-year risk-free British security?

• A)2)28%
• B)2)23%
• C)2)46%
• D)2)49%
• E)2)37%

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Definitions:

Cost Of Goods Sold

The cost of goods sold (COGS) refers to the direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Job Costing

A cost accounting system used to assign costs to specific jobs or batches, typically used in industries with unique, customizable orders.

Inventory Valuation

The monetary amount associated with the goods held by a company to be sold or used in production.

Operation Costing

A hybrid costing system used in manufacturing, combining elements of both job-order and process costing.