The 1-year forward rate for the british pound is pound05429, Financial Management

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The 1-year forward rate for the british pound is pound05429

The 1-year forward rate for the British pound is £0.5429 = $1. The spot rate is £0.5402 = $1. The interest rate on a risk-free asset in the U.K. is 3%. If interest rate parity exists, a 1 year risk-free security in the U.S. is yielding _____. (Please explain the calculation.)

a. 2.49%

b. 2.91%

c. 2.25%

d. 2.83%

e. 2.67%

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Financial Management: The 1-year forward rate for the british pound is pound05429

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Financial Management: The 1-year forward rate for the british pound is pound05429

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