Consider the following: an investor in the U.S.is pondering a one-year investment.She can purchase a domestic bond for $1,000 that has an interest rate of i or she can purchase a bond in England for 1,500 British pounds ($\le$) that pays an interest rate of if.The current exchange rate is $1.50/$\le$.She considers the bonds to be of equal risk.i ¹ if.What do you know?

Question

Quizplus · Accepted Answer

The exchange rate must be flexible for arbitrage to work.

Consider the Following: an Investor in the U ≤\le≤ ) That Pays an Interest Rate of If

Consider the Following: an Investor in the U $\le$ ) That Pays an Interest Rate of If