Problemassume the spot rate for the british pound currently, Ask an Expert

Accounting

Problem:

Assume the spot rate for the British pound currently is £0.6211 per $1. Also assume the one-year forward rate is £0.6347 per $1. A risk-free asset in the U.S. is currently earning 3.4 percent.

Required:

Question: If interest rate parity holds, what rate can you earn on a one-year risk-free British security?

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170100

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