Assume the Spot Rate for the British Pound Currently Is

question 8

Multiple Choice

Assume the spot rate for the British pound currently is £0.6211 per $1.Also assume the one-year forward rate is £0.6347 per $1.A risk-free asset in the U.S.is currently earning 3.4 percent.If interest rate parity holds,what rate can you earn on a one-year risk-free British security?

• A)1.18 percent
• B)1.57 percent
• C)3.67 percent
• D)5.66 percent
• E)5.92 percent

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