Suppose the interest rate on 12-month government bonds is 2% (per annum) in the United States and
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Suppose the interest rate on 12-month government bonds is 2% (per annum) in the United States and 5% (per annum) in the United Kingdom. The current spot rate is 1.5 dollars per pound today. At the end of the year, the spot rate equals 1.6 dollars per pound. The extra return on 12-month government bonds in the UnitedbKingdom as compared to the United States will be_____.
a. 3%
b. 3.67%
c. 6.67%
d. 9.67%
Related Book For
Introduction to Finance Markets Investments and Financial Management
ISBN: 978-1118492673
15th edition
Authors: Melicher Ronald, Norton Edgar
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