Suppose the 1-Year Risk-Free Rate of Return in the U

question 10

Multiple Choice

Suppose the 1-year risk-free rate of return in the U.S.is 5%.The current exchange rate is 1 pound = U.S.$1.60.The 1-year forward rate is 1 pound = $1.57.What is the minimum yield on a 1-year risk-free security in Britain that would induce a U.S.investor to invest in the British security?

• A)2.44%
• B)2.50%
• C)7.00%
• D)7.62%
• E)none of the above

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Definitions:

Trophic Category

A classification describing the position of organisms within a food chain, based on their feeding relationships and energy transfer.

Detritivore

An organism that feeds on dead organic matter, largely contributing to decomposition and nutrient recycling in ecosystems.

Earthworm

Earthworms are tube-shaped, segmented worms found in soil that play a crucial role in aerating soil and breaking down dead organic matter.

Decomposer

An organism, usually a bacterium or fungus, that breaks down dead cells and materials, recycling nutrients back into the ecosystem.