The One-Year Forward Exchange Rate for the British Pound Is

question 2

Multiple Choice

The one-year forward exchange rate for the British Pound is $1.70/Pound.If the one-year U.S.interest rate is 5% and the one-year British interest rate is 6%,compute the implied spot exchange rate in $/Pound.

• A)1.69
• B)1.72
• C)1.75
• D)1.78

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Definitions:

Finished Goods Inventory

The total value of all completed products that are ready for sale at the end of an accounting period, part of a company's current assets.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor directly used to create the good.

Material

Substantial or significant; in accounting, referring to an amount that would influence the decision of an informed user.

Labor

The human effort (physical or mental) contributed to the production of goods and services.