Assume the Following Information If You Use Covered Interest Arbitrage for a 90-Day Investment

question 44

Multiple Choice

Assume the following information:
$$\begin{array}{l}\text { You have } \$ 1,000,000 \text { to invest: }\\\begin{array} { l l r } \text { Current spot rate of pound } & = & \$ 1.60 \\\text { 90-day forward rate of pound } & = & \$ 1.57 \\\text { 3-month deposit rate in U.S. } & = & 3 \% \\\text { 3-month deposit rate in U.K. } & = & 4 \%\end{array}\end{array}$$
If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?

• A) $1,020,500.
• B) $1,045,600.
• C) $1,073,330.
• D) $1,094,230.
• E) $1,116,250.

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Definitions:

Perception

The process by which individuals organize and interpret their sensory impressions to give meaning to their environment.

Sense Receptors

Cells or organs that receive stimuli from the external or internal environment and convert them into neural signals for interpretation by the brain.

Non-conscious Processing

Mental processes that occur without conscious awareness, influencing perceptions, thoughts, and behaviors.

Information Processing

A cognitive approach that likens the mind to a computer, focusing on how information is encoded, stored, and retrieved.