If UK Interest Rates Are Higher Than Japanese Interest Rates, Then

Multiple Choice

If U.K. interest rates are higher than Japanese interest rates, then the theory of covered Interest arbitrage would suggest that, in the pound/yen exchange markets, the yen would Be at a forward __________ and the pound would __________.

A) discount; be at a forward premium
B) discount; also be at a forward discount
C) premium; also be at a forward premium
D) premium; be at a forward discount