Exhibit 11.1 Assume the Following: (1) the Interest Rate on Six-Month Treasury

Multiple Choice

Exhibit 11.1

Assume the following: (1) the interest rate on six-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States; (2) today's spot price of the pound is $1.50, while the six-month forward price of the pound is $1.485.

-Refer to Exhibit 11.1.If U.S.investors cover their exchange rate risk, then the extra return for the six months on the U.K.treasury bills is

A) 1.0 percent.
B) 1.5 percent.
C) 2.0 percent.
D) 2.5 percent.