Suppose That the Risk-Free Rates in the United States and in the United

Multiple Choice

Suppose that the risk-free rates in the United States and in the United Kingdom are 5% and 4%, respectively. The spot exchange rate between the dollar and the pound is $1.80/BP. What should the futures price of the pound for a one-year contract be to prevent arbitrage opportunities, ignoring transactions costs?

A) $1.62/BP
B) $1.72/BP
C) $1.82/BP
D) $1.92/BP