Suppose the Exchange Rates Are as Follows: Assume Interest

question 49

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)2.36 percent
• B)2.87 percent
• C)2.94 percent
• D)3.10 percent
• E)3.52 percent

---

Definitions:

Spanish Empire

A historical empire that included territories and colonies across the globe, known for its vast reach and wealth in the 16th to 18th centuries.

British North America

Territories in North America under British rule before the formation of the United States and Canada, encompassing colonies that later became part of these and other countries.

Glorious Revolution

The overthrow of King James II of England in 1688 by a union of Parliamentarians with the Dutch stadtholder William III, marking the transition towards constitutional monarchy.

Massachusetts Colony

One of the original English settlements in North America, established in 1620 by the Puritans, it played a central role in the early history of what became the United States.