Let RUS be the annual risk free rate in the United States,RUK be the risk free rate in the United Kingdom,F be the futures price of $/BP for a 1-year contract,and E the spot exchange rate of $/BP.Which one of the following is true?
A) if RUS > RUK, then E > F
B) if RUS < RUK, then E < F
C) if RUS > RUK, then E < F
D) if RUS < RUK, then F = E
E) There is no consistent relationship that can be predicted.
Correct Answer:
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