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

question 18

Multiple Choice

Suppose the 1-year risk-free rate of return in the U.S. is 4.5% and the 1-year risk-free rate of return in Britain is 7.7%. The current exchange rate is 1 pound = U.S. $1.60. A 1-year future exchange rate of __________ for the pound would make a U.S. investor indifferent between investing in the U.S. security and investing in the British security.

• A) 1.5525
• B) 2.0411
• C) 1.7500
• D) 2.3369

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Definitions:

Business Organization

An entity formed for the purpose of carrying out commercial enterprise, involving structured operations and strategies to meet its goals and objectives.

Liberal Reformers

Individuals or groups advocating for changes that align with liberal principles, such as increased rights and freedoms, often in the context of social justice.

Wealth Inequality

The unequal distribution of assets within a population, leading to significant differences in wealth among individuals or groups.

Individual Liberty

The freedom of an individual to have agency over their own actions, without undue restraint by the state or other external authority.