1. Suppose the 1-year risk-free rate of return in the USA is 4.5%. The current exchange rate is 1 Pound=$1.30. The 1-year forward rate is 1 Pound = US $1.32. The minimum yield on a 1-year risk-free bond in Britain that would induce a U.S. investor to invest in the British bond is: A) 2.7% B) 2.8% C) 2.9% D) 3.0%
1. Suppose the 1-year risk-free rate of return in the USA is 4.5%. The current exchange rate is 1 Pound=$1.30. The 1-year forward rate is 1 Pound = US $1.32. The minimum yield on a 1-year risk-free bond in Britain that would induce a U.S. investor to invest in the British bond is: A) 2.7% B) 2.8% C) 2.9% D) 3.0%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:1. Suppose the 1-year risk-free rate of return in the USA is 4.5%. The current exchange
rate is 1 Pound=$1.30. The 1-year forward rate is 1 Pound = US $1.32. The minimum
yield on a 1-year risk-free bond in Britain that would induce a U.S. investor to invest in
the British bond is:
A) 2.7%
B) 2.8%
C) 2.9%
D) 3.0%
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