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6. The yield on a 1-year bill in the UK is 8% and the present exchange rate is 1 pound equals US $1.60. If you

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6. The yield on a 1-year bill in the UK is 8% and the present exchange rate is 1 pound equals US $1.60. If you expect the exchange rate to be one pound$1.50 a year from now, the return a US investor can expect to earn by investing in UK bills is: b. . d. e. f. 0% 8% 1.25% 12.55% 125% 7. Suppose the 1-year RF rate of return in the US is 5%. The current exchange rate is 1-pound equals $1.60. The 1 year forward rate is 1-pound equals $1.57. What is the minimum yield on a one-year RF security in Britain that would induce a US investor to invest in the British security? a. b. c. d. e. f. 2.44% 2.50% 7.00% 7.62% 88% 77% 8. Exchange rate risk: Results from changes in the exchange rate between the currency of the investor and the country in which the investment is made a. b. Can be hedged by using a forward or futures contract in FOREX c. Canot be eliminated d. Results from changes in the exchange rates between the currency of the investor and the country in which the investment is made and cannot be eliminated Results in changes in the exchange rates between the currency of the investor and the country in which the investment is made and can be hedged by using a forward or futures contract in FOREX None of the above e. f

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