Use the Information for the Question(s)below

question 35

Multiple Choice

Use the information for the question(s) below.
The current spot exchange rate,S,is $1.8862/£.Suppose that the yield curve in both countries is flat.The risk-free rate on dollars,r_$,is 5.35% and the risk-free interest rate on pounds,r_£,is 4.80%.
-Using the covered interest parity condition,the calculated one-year forward rate F₁ is closest to:

• A)$1.8568/£
• B)$1.8764/£
• C)$1.9161/£
• D)$1.8961/£

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Definitions:

Teratogens

Environmental agents that can cause birth defects or developmental malformations if exposed to a fetus.

Prenatal Exposure

The exposure of an unborn child to substances, conditions, or behaviors that could affect development or health outcomes.

Cocaine

A powerful stimulant drug extracted from the leaves of the coca plant, often used recreationally and known for its potential for addiction.

Heroin

An illegal opioid drug known for its highly addictive properties and potential for abuse.