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Intro The nominal annual yield on 6-month Treasury bills is 4% and the yield on risk-free British 6-month securities is 7.5% (both quoted as APRs).

Intro

The nominal annual yield on 6-month Treasury bills is 4% and the yield on risk-free British 6-month securities is 7.5% (both quoted as APRs). Currently, 1 British pounds buys $1.31, or 1 = $1.31.

Part 1

If interest rate parity holds, what is the 6-month forward exchange rate in dollars per pound?

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