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

question 12

Multiple Choice

Suppose the 1-year risk-free rate of return in the U.S. is 6%. The current exchange rate is 1 pound = U.S. $1.62. The 1-year forward rate is 1 pound = $1.53. 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) 15.44%
• B) 13.50%
• C) 12.24%
• D) 7.62%
• E) None of the options

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Definitions:

Cesarean-Section

This is an operative method for childbirth, involving cuts in the mother's abdomen and womb.

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A Roman general and statesman who played a critical role in the events that led to the demise of the Roman Republic and the rise of the Roman Empire.

C-Section

An operation to give birth, involving the creation of incisions in the abdominal and uterine walls.

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A sign that a fetus is not well, often indicated by abnormal heart rates or reduced movement, and may require medical intervention.