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 4%, and the 1-year risk-free rate of return in Britain is 7%.The current exchange rate is 1 pound = Cad.$1.65.A 1-year future exchange rate of __________ for the pound would make a Canadian investor indifferent between investing in the Canadian security and investing in the British security.

A) 1.6037
B) 2.0411
C) 1.7500
D) 2.3369