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Suppose that the one-year U.S. interest rate is 4% and the one-year U.K. interest rate is 6%. If the current spot rate is $1.80 per

Suppose that the one-year U.S. interest rate is 4% and the one-year U.K. interest rate is 6%. If the current spot rate is $1.80 per pound, what must the one-year forward rate ($/pound) be according to the approximate covered interest parity?

a. 1.360

b. 1.764

c. 1.836

d. 1.980

And why?

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