The nominal annual interest rate on 6-month U.S Treasuries is 0.06% (i.e, the semiannual return is 0.03%). The spot rate of the British pound is $1.6426 (£0.6088 per U.S dollar) and the 6-month forward rate of the British pound is $1.6396 (£0.6099 per U.S dollar). If interest rate parity holds, what is the nominal interest rate on default-free 6-month British bonds?

The nominal annual interest rate on 6-month U.S Treasuries is 0.06% (i.e, the semiannual return is 0.03%). The spot rate of the British pound is $1.6426 (£0.6088 per U.S dollar) and the 6-month forward rate of the British pound is $1.6396 (£0.6099 per U.S dollar). If interest rate parity holds, what is the nominal interest rate on default-free 6-month British bonds?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter22: International Financial Management

Section: Chapter Questions

Problem 1P

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