Suppose the Exchange Rates Are as Follows: Assume Interest

question 51

Multiple Choice

Suppose the exchange rates are as follows: Assume interest rate parity holds and the current six-month risk-free rate in the United States is 3.1 percent. What must the six-month risk-free rate be in Great Britain?

• A)2.73 percent
• B)2.87 percent
• C)2.94 percent
• D)3.10 percent
• E)3.52 percent

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Definitions:

Discount Period

The time frame during which a discount is offered or can be availed of.

Complement Rates

Rates that when added together with another rate total a complete or whole number, often used in probability or statistics.

Equivalent Single Discount

A single discount rate that equates to a series of multiple discounts, simplifying pricing and discount calculations.

Complement Rates

The rates or values that, when combined, complete something to a whole or 100%.