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 >
B) If RUS < RUK, then E <
C) If RUS > RUK, then E <
D) If RUS < RUK, then F =E.
Correct Answer:
Verified
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