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Suppose that the annual interest rate in US is 4% while it is 6% in UK. The spot rate of British pound is $1.28 per
Suppose that the annual interest rate in US is 4% while it is 6% in UK. The spot rate of British pound is $1.28 per pound. Ignore all costs, what is British Pound's 1-
year forward rate if interest rate parity holds? (note: use the original interest rate parity formula to compute forward premium or discount, DO NOT use the simplified
formula to compute forward premium or discount; US is the home country)
O $ 1.39
O $ 1.26
O $ 1.45
O $ 1.01
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