Sally Invests Part

1:

Assume that 1 year nominal interest rates on U.S. government securities are 3 percent, and 1 year nominal interest rates on U.K government securities are 5 percent. Consider an investor named Sally who has $1,000 in USD to invest in U.K. government securities for 1 year. Assume that the spot rate today is $1.550 USD per GBP. How many GBP would Sally receive today for her $1000 when she converts it to GBP? (Note: GBP = Great Britain Pounds)

A.

635.22

B.

645.16

C.

799.05

D.

1550.00