Suppose the 1-Year Risk-Free Rate of Return in Canada Is

question 6

Multiple Choice

Suppose the 1-year risk-free rate of return in Canada is 4% and the 1-year risk-free rate of return in Britain is 7%.The current exchange rate is 1 pound = C $1.65.A 1-year future exchange rate of __________ for the pound would make a Canadian investor indifferent between investing in the Canadian security and investing the British security.

• A) 1.6037
• B) 2.0411
• C) 1.7500
• D) 2.3369
• E) none of these