FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com | Page 197

Suppose 90-day investments in Britain have a 6% annualized
return and a 1.5% quarterly (90-day) return. In the U.S., 90-day
investments of similar risk have a 4% annualized return and a 1%
quarterly (90-day) return. In the 90-day forward market, 1 British pound
equals $1.65. If interest rate parity holds, what is the spot exchange
rate?
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Question 15
Which of the following statements is NOT CORRECT?
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