Assume the Following: the Current Spot Rate S_$/£ = 2

question 31

Multiple Choice

Assume the following: the current spot rate S_$/£ = 2.00 and the annual interest rates: i_US = 4% and i_UK = 8%.According to covered interest parity,if an intern at a bank in U.K.sets the 90-day forward: F⁹⁰_$/£ = 1.80,then:

• A) the intern has correctly set the forward rate.
• B) both U.S. and U.K. investment returns are equal.
• C) the British investment return exceeds the U.S. investment return
• D) the U.S. investment return exceed the British investment return

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Definitions:

Average Cost Flow

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all inventory items available for sale.

Ending Inventory

Ending inventory is the total value of goods available for sale at the end of an accounting period.

Inventory Items

Inventory items refer to the goods and materials that a business holds for the ultimate goal of resale or processing.

Gross Amount

The total sum before any deductions are made, such as taxes or discounts.