On May 31, George, a U.S. investor, decided to buy three-month Treasury bills. He found that the per-annum interest rate on three-month Treasury bills is 7.00% in New York and 9.00% in Tokyo. Based on this information and assuming that tax costs and other transaction costs are negligible in the two countries, it is in George's best interest to purchase three-month Treasury bills, because it allows him to earn more for the three months. 0.50% 0.66% On May 31, the spot rate for the yen was $0.100, and the selling price of the three-month forward yen was $0.099. At that time, George chose to ignore this difference in exchange rates. In three months, however, the spot rate for the yen rose to $0.102 per yen. Thus, when George converted the investment proceeds back into U.S. dollars, his actual return on investment was As a result of this transaction, Ge when the Treasury bills mature. 1.50% -2.50% 2.50% -1.50% that there is great uncertainty about how many dollars he will receive to adjust his investment strategy to eliminate this uncertainty. What As a result of this transaction, George realizes that there is great uncertainty about how many dollars he will receive when the Treasury bills mature. So, he decides to adjust his investment strategy to eliminate this uncertainty. What should George's strategy be the next time he considers investing in Treasury bills? Exchange half of the anticipated proceeds of the investment for domestic currency. Sell enough foreign currency on the forward market to match the anticipated proceeds from the investment. Avoid investment in foreign institutions. Had George used the covered interest arbitrage on May 31, his net return on investment (relative to purchasing the U.S. Treasury bills) in Japanese three-month Treasury bills would be -0.5% 0.5% -1.5% 1.5%