A U.S. investor has borrowed pounds,converted them to dollars,and invested the dollars in the United States to take advantage of interest rate differentials. To cover the currency risk,the investor should

Question

Quizplus · Accepted Answer

To cover the currency risk associated with borrowing in pounds and investing in dollars, the investor should buy pounds forward. This allows the investor to lock in a rate at which they can convert dollars back to pounds in the future, ensuring they can meet their repayment obligations without being exposed to adverse currency movements.

A US Investor Has Borrowed Pounds,converted Them to Dollars,and Invested the the Dollars