Question
Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have
Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return. In the 90-day forward market, 1 British pound equals $1.6038. If interest rate parity holds, what is the spot exchange rate in dollars per British pound? Enter your answer rounded to four decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.45678 then enter as 12300.4568 in the answer box.
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