Which of the Following Is True If One Year Forward

question 23

Multiple Choice

Which of the following is true if one year forward rate is F = 1.81$/£; current spot rate is S = 1.83$/£; and interest rates are i = 3%,and i* = 3.5% (where exchange rates are quoted in $/£,i is the interest rate in the U.S.and i* is the interest rate in the U.K.) ?

• A) Arbitrage is not possible
• B) Arbitrage is possible and arbitrage strategy involves borrowing $
• C) Arbitrage is possible and arbitrage strategy involves borrowing £
• D) Arbitrage is possible; however, there is not enough information to pick one of the answers above.

Record journal entries for various equity transactions, including issuing stock and paying dividends.

Understand and calculate earnings per share (EPS).

Understand treasury stock, including reasons for a company to hold it.

Compute and interpret book value per share and its relevance in financial analysis.

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Definitions:

Trust

The firm belief in the reliability, truth, ability, or strength of someone or something.

Commitment

The state or quality of being dedicated to a cause, activity, or goal, showing willingness to give time and energy to something believed in.

Honesty

The quality of being truthful, transparent, and free from deceit in one’s actions and statements.

Obligation

A duty or commitment that compels someone to act in a certain way, often based on moral or legal reasons.