The 1-year risk-free rate of return in the U.S. is 3%
Question # 00523182
Posted By:
Updated on: 05/06/2017 05:57 AM Due on: 05/06/2017
The 1-year risk-free rate of return in the U.S. is 3%. The current exchange rate is 1 pound = U.S. $1.60. The 1-year forward rate is 1 pound = $1.54. What is the minimum yield on a 1-year risk-free security in Britain that would induce a U.S. investor to invest in the British security (instead of the 1 year US risk free asset)?
-
Rating:
/5
Solution: The 1-year risk-free rate of return in the U.S. is 3%