Suppose the 1-Year Risk-Free Rate of Return in the U

Multiple Choice

Suppose the 1-year risk-free rate of return in the U.S. is 6%. The current exchange rate is 1 pound = U.S. $1.62. The 1-year forward rate is 1 pound = $1.53. What is the minimum yield on a 1-year risk-free security in Britain that would induce a U.S. investor to invest in the British security?

A) 15.44%
B) 13.50%
C) 12.24%
D) 7.62%
E) None of the options