Question
The spot exchange rate ($/pound) is 1.5678 and the 1-year forward exchange rate is 1.6031. If the interest rate in the U.S. is 4.5%, then
The spot exchange rate ($/pound) is 1.5678 and the 1-year forward exchange rate is 1.6031. If the interest rate in the U.S. is 4.5%, then interest rate in the U.K.. should be approximately ______ according to covered interest parity.
A. 2%
B. 2.25%
C. 3%
D. 4.5%
E. 6.75%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Management Theory And Practice
Authors: Eugene F Brigham, Michael C Ehrhardt
11th Edition
0324259689, 9780324259681
