Suppose That the Risk-Free Rates in the United States and in the United

question 1

Multiple Choice

Suppose that the risk-free rates in the United States and in the United Kingdom are 4% and 6%,respectively.The spot exchange rate between the dollar and the pound is $1.60/BP.What should the futures price of the pound for a one-year contract be to prevent arbitrage opportunities,ignoring transactions costs.

• A) $1.60/BP
• B) $1.70/BP
• C) $1.66/Bp
• D) $1.63/BP
• E) $1.57/BP

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