Assume the Annual British Interest Rate Is Above the Annual

Multiple Choice

Assume the annual British interest rate is above the annual U.S. interest rate. Also assume the pound's forward rate of $1.75 equals the pound's spot rate. Given this information, interest rate parity ____ exist, and the U.S. firm ____ lock in a lower financing cost by borrowing pounds for one year.

A) does; could
B) does; could not
C) does not; could not
D) does not; could