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Assume That the 3-Month IUS = 8% and the 3-Month

question 37

Multiple Choice

Assume that the 3-month iUS = 8% and the 3-month iUK = 4%,and the spot rate is $1.50 per pound.Using the approximate covered interest rate parity condition,the 3-month forward rate $/pound is:


Definitions:

Confederate Currency

The currency issued by the Confederate States of America during the American Civil War, now considered a collectible item.

Market Price

The prevailing rate at which a good or service is available for purchase or sale in the public market.

Inelastic

A characteristic of demand or supply that signifies a limited response to changes in prices or other economic factors.

Unit Elastic

A situation where a percentage change in the price of a good results in an equal percentage change in the quantity demanded.

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