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Suppose the 6 Month Risk-Free Rate of Return in the USA

Question 39

Multiple Choice

Suppose the 6 month risk-free rate of return in the USA is 5%.The current exchange rate is 1 Pound = US $2.05.The 6 month forward rate is 1 Pound = US $2.00.The minimum yield on a 6 month risk-free security in Britain that would induce a U.S.investor to invest in the British security is ________.


A) 5.06%
B) 6.74%
C) 8.48%
D) 10.13%

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