Suppose That the One-Year U

question 29

Multiple Choice

Suppose that the one-year U.S.interest rate is 4% and the one-year U.K.interest rate is 6%.If the current spot rate is $1.80 per pound,what must the one-year forward rate $/pound be according to the approximate covered interest parity?

• A) 1.360
• B) 1.764
• C) 1.836
• D) 1.980

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Definitions:

Explored

The act of investigating or examining something thoroughly in order to discover more information or understand it better.

Decisions

The act or process of making choices or judgments after considering possible actions and their outcomes.

Personal Fable

A cognitive distortion experienced during adolescence, leading individuals to believe they are unique and invulnerable.

Unprotected Sex

Sexual activity without the use of barrier methods of contraception, which increases the risk of sexually transmitted infections and unintended pregnancies.