The Yield on a 1-Year Bill in the U

Multiple Choice

The yield on a 1-year bill in the U.K. is 8%, and the present exchange rate is 1 pound = U.S. $1.60. If you expect the exchange rate to be 1 pound = U.S. $1.50 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is

A) −6.7%.
B) 0%.
C) 8%.
D) 1.25%.
E) None of the options are correct.