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Suppose That the Effective Return to a U

Question 9

Multiple Choice

Suppose that the effective return to a U.S.investor from buying a U.K.bond is 5.55%. Forward and spot exchange rates ($/£) are 2.10 and 2.00 respectively. The interest rate on the U.K.bond is most likely equal to:


A) 5.45%
B) 5.500%
C) 5.650%
D) 5.60%

Correct Answer:

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