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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Economic

Relating to the economy, or the comprehensive system involving the production, distribution, and consumption of goods and services.

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The phenomenon of interpreting information in a way that aligns with pre-existing beliefs or opinions, ignoring conflicting data.

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