The 1-year forward rate for the British pound is £0.6781 = $1. The spot rate is £0.6789 = $1. The interest rate on a risk-free asset in the U.K. is 4.6 percent. If interest rate parity exists, what is the 1 year risk-free rate in the U.S.?
A) 4.68 percent
B) 4.72 percent
C) 4.77 percent
D) 4.83 percent
E) 4.87 percent
Correct Answer:
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