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Helen [10]
3 years ago
15

Assume the spot rate for the British pound currently is £.6369 per $1. Also assume the one-year forward rate is £.6421 per $1. A

risk-free asset in the U.S. is currently earning 3.2 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free British security?
Business
1 answer:
inna [77]3 years ago
5 0

Answer:

4.04%

Explanation:

Using the Interest rate parity formula according to this theory the forward exchange rate of  should be equal to the spot rate multiplied by the interest rate of the domestic country divided by the interest rate of the foreign country so from this formula

F=S*(1+i)/(1+r)

we derive

(1+r)=F/S*(1+i)

1+r =0.6421/0.6369*(1.032)

1+r =1.0404

 r   = 0.0404/4.04%

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4 0
3 years ago
Justin's​ Electronics, Inc., in​ Nashville, produces short runs of custom airwave scanners for the defense industry. You have be
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45

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6 0
3 years ago
What are the eight differences between personal selling (direct contact) and non-personal selling (indirect contact, such as Int
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3 years ago
Nyeil is a consumer products firm that is growing at a constant rate of 6.5 percent. The firm’s last dividend was R3.36. If the
OleMash [197]

Answer:

31.12

Explanation:

Given that,

Growing at a constant rate = 6.5%

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Required rate of return = 18%

Expected dividend next year = 3.36 × (1 + 6.5%)

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3 years ago
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