The Treasurer of a Major U

question 72

Multiple Choice

The treasurer of a major U.S. firm has $12 million to invest for 3 months. The interest rate in the U.S. is 0.42 percent per month. The interest rate in Great Britain is 0.52 percent per month. The spot exchange rate is £0.70, and the three-month forward rate is £0.71. Ignoring transaction costs, in which country would the treasurer want to invest the company's funds? Why?

• A) U.S.; earn an additional $47,211.16
• B) U.S.; earn an additional $135,325.24
• C) U.K.; earn an additional $9,418.02
• D) U.K.; earn an additional $38,522.47
• E) U.K.; earn an additional $121,510.67

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Definitions:

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