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5. The current spot exchange rate between the dollar and the pound is 1.22 $/. Inflation over the next year is expected to be 8.11%
5. The current spot exchange rate between the dollar and the pound is 1.22 $/. Inflation over the next year is expected to be 8.11% in the US and 1-year Treasury debt has a 4.2% yield. Inflation over the next year is expected to be 9.9% in the UK and the 1-year Gilt debt (UK sovereign debt) has a 4.9% yield. What should the forward rate if the 1-year treasury yield changed to the following: a. 3.51% b. 4.59% c. 4.98% d. 5.44%
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