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You are considering purchasing HKD-bonds. An investment advisor informs you You can exchange USD for HKD in the spot exchange market, invest in in a

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You are considering purchasing HKD-bonds. An investment advisor informs you "You can exchange USD for HKD in the spot exchange market, invest in in a risk-free, one-year HKD bond, and use a one-year forward contract for converting the proceeds back into USD". Spot exchange rate (HKD/USD)=0.1714 One-Year HKD Interest Rate =2.20% One-Year Forward Rate (HKD/USD) =0.1724 If you use this strategy, which is the closest to what you will earn? 2% 3% 5%

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