Use the information for the question(s) below.
The current spot exchange rate, S, is $1.8862/£. Suppose that the yield curve in both countries is flat. The risk-free rate on dollars, r$, is 5.35% and the risk-free interest rate on pounds, r£, is 4.80%.
-Using the covered interest parity condition, the calculated three-year forward rate F3 is closest to:
A) $1.8568/£
B) $1.8961/£
C) $1.9161/£
D) $1.8764/£
Correct Answer:
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