Suppose you have one U.S.dollar with which you wish to purchase U.K.(one-year)bonds in period t.Which of the following expressions represents the amount of U.S.dollars you will receive in one year from purchasing U.K.bonds in period t?

Question

Quizplus · Accepted Answer

The formula for calculating the future value in U.S. dollars from one-year U.K. bonds is (1 + i*)Et / Eet+1, where i* is the U.K. interest rate in period t and Et and Eet+1 represent the exchange rates between U.S. dollars and pounds in periods t and t+1, respectively. Therefore, choice D is the correct expression.

Suppose You Have One U