A U.S. investor has a choice between a risk-free one-year U.S. security with an annual return of 4%, and a comparable British security with a return of 5%. If the spot rate is $1.43/, the one-year forward rate is $1.44/, and there are no transaction costs. (Hint: Use interest rate parity to answer this question)

Ideally, what should the return on the US security be? (3pts)

Question 11 options:

	8.75%
	6.4%
	5.73%
	3.33%

Question 12 (Mandatory) (2 points)

Should the investor invest in this US security? (2 pt)

Question 12 options:

	Yes
	No

The following refers to questions 11-12 A U.S. investor has a choice between a risk-free one-year U.S. security with an annual return of 4%, and a comparable British security with a return of 5%. If the spot rate is $1.43/, the one-year forward rate is $1.44/, and there are no transaction costs. (Hint: Use interest rate parity to answer this question) Ideally, what should the return on the US security be? (3pts) 8.75% 6.4% 5.73% 3.33% Question 12 (Mandatory) (2 points) Should the investor invest in this US security? (2 pt) Yes NO