Suppose the Exchange Rates Are as Follows Assume Interest Rate Parity Holds and the Current Six-Month Risk-Free

question 99

Multiple Choice

Suppose the exchange rates are as follows: $$\begin{array} { c c } \frac { \text { Currency } } { \text { United Kingdom pound } } & \frac { \text { Currency per U.S. \$ } } { 0.5403 } \\6 \text {-months forward } & 0.5363\end{array}$$ 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)2.36 percent
• B)2.87 percent
• C)2.94 percent
• D)3.10 percent
• E)3.52 percent

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