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

question 19

Multiple Choice

Suppose the 1-year risk-free rate of return in the USA is 5% and the 1-year risk-free rate of return in Britain is 8%.The current exchange rate is $1 = ₤0.50.A
1-year future exchange rate of __________ would make a U.S.investor indifferent between investing in the U.S.security and investing in the British security.

• A) ₤0.5150
• B) ₤0.5142
• C) ₤0.5123
• D) ₤0.4859

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