A Canadian fiRm Is Considering Purchasing a Subsidiary in Great

A Canadian firm is considering purchasing a subsidiary in Great Britain. The subsidiary will cost £16 million and will generate cash inflows of £7.6 million per year at the end of each of the next three
Years. After that, the company will be worthless. The current exchange rate is £0.83 British pounds
Per $1. The Canadian inflation rate is expected to be 4% over this period. The current risk-free rate
Of interest in Canada is 5% and the risk-free rate in Great Britain is 8%.[LINE][LINE]If interest rate
Parity holds, what is the one-year forward rate for exchanging pounds for dollars?

A) 0.830
B) 0.854
C) 0.863
D) 0.881
E) 0.907