Assume the spot rate for the British pound currently is £0.6211 per $1. Also assume the one-year forward rate is £0.6347 per $1

Assume the spot rate for the British pound currently is £0.6211 per $1. Also assume the one-year forward rate is £0.6347 per $1. A risk-free asset in the U.S. is currently earning 3.4 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free British security?    A.  1.18 percent B.  1.57 percent C.  3.67 percent D.  5.66 percent E.  5.92 percent (£0.6347/£0.6211) = [(1 + RFC)/1.034]; RFC = 5.66 percent

71.

A risk-free asset in the U.S. is currently yielding 4 percent while a Canadian risk-free asset is yielding 2 percent. Assume the current spot rate is C$1.2103. What is the approximate three-year forward rate if interest rate parity holds?    A.  C$1.1391 B.  C$1.1744 C.  C$1.2241 D.  C$1.2295 E.  C$1.2470 F3 = C$1.2103 × [1 + (0.02 - 0.04)]3 = C$1.1391

72.

Assume the spot rate on the Canadian dollar is C$1.1847. The risk-free nominal rate in the U.S. is 5 percent while it is only 4 percent in Canada. What one-year forward rate will create interest rate parity?    A.  C$1.1362 B.  C$1.1429 C.  C$1.1734 D.  C$1.1799 E.  C$1.1961 F1/C$1.1847 = 1.04/1.05; F1 = C$1.1734

73.

Assume the spot rate on the Canadian dollar is C$0.9872. The risk-free nominal rate in the U.S. is 5.4 percent while it is only 4.2 percent in Canada. Which one of the following four-year forward rates best establishes the approximate interest rate parity condition?    A.  C$0.9407 B.  C$0.9608 C.  C$1.0267 D.  C$1.0519 E.  C$1.0597 F4 = C$0.9872 × [1 + (0.042 - 0.054)]4 = C$0.9407