The next questions refer to the following.
Suppose one-year interest rates in Great Britain are 10%, and one-year interest rates in the US are 6%. During the course of the year, the pound depreciates 10% against the dollar.
-Compared to buying British bonds,British speculators who purchased US bonds at the start of the year received rates of return about

Question

Quizplus · Accepted Answer

If a British speculator purchased US bonds at the start of the year, they would have earned the US interest rate of 6%. Assuming they converted their returns back to pounds at the end of the year, they would have received a higher return due to the pound depreciating by 10% against the dollar. 
The effective return for a British speculator who purchased US bonds would be:
6% (US interest rate) + 10% (depreciation of pound) = 16% 
Compared to the 10% interest rate on British bonds, this is a higher return of 6 percentage points. Therefore, the correct answer is E) 8 percentage points higher.

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