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

question 48

Multiple Choice

Suppose the 1-year risk-free rate of return in the U.S. is 4% and the 1-year risk-free rate of return in Britain is 6%. The current exchange rate is 1 pound = U.S. $1.67. 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) 1.6385
• B) 2.0411
• C) 1.7500
• D) 2.3369

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Definitions:

Locus Of Control

A psychological concept that refers to individuals' beliefs about the extent to which the outcomes of their actions are under their own control (internal locus) or beyond their control and determined by external forces (external locus).

Extraversion

A personality trait characterized by outgoingness, high energy, and sociability.

Openness

A personality trait that features characteristics of imaginative, curious, and open-minded individuals, often associated with a willingness to experience new things.

Maslow's Ideas

The psychological theories proposed by Abraham Maslow, including the hierarchy of needs, which outlines a progression of human needs from basic to self-actualization.