Suppose the 1-Year Risk-Free Rate of Return in Canada Is

Multiple Choice

Suppose the 1-year risk-free rate of return in Canada is 5%.The current exchange rate is 1 pound = Cad $1.60.The 1-year forward rate is 1 pound = $1.57.What is the minimum yield on a 1-year risk-free security in Britain that would induce a Canadian investor to invest in the British security?

A) 2.44%
B) 2.50%
C) 7.00%
D) 7.62%