Suppose the 12-month interest rate on a U.S. Treasury bill is 16 percent, and the one-year interest rate on a comparable British Treasury bill is 6 percent. The exchange rate today is $2.00 per pound. What must be the expected exchange rate at maturity for interest rate parity to hold?
a. $1.00 = 0.50 pound
b. $1.00 = 0.75 pound
c. 1 pound = $2.20
d. 1 pound = $1.80
e. 1 pound = $2.50
c
You might also like to view...
Spending VCU4 on real-world goods and services causes the nation's:
a. Demand for real goods and services to remain the same and monetary base to rise. b. Demand for real goods and services to rise and M2 money supply to rise. c. Demand for real goods and services to rise and M2 money multiplier to remain the same. d. Demand for real goods and services to remain the same and M2 money supply to rise.
Which of the following is not a basic monetary policy tool used by the Fed?
A. Deposit insurance B. The reserve requirement C. The discount rate D. The sale and purchase of Treasury bonds
The typical firm in perfect competition is
A. a fast food restaurant chain. B. an electrical power company. C. a farm. D. an airline.
If a firm collects $80 in revenue when it sells 4 units, $100 in revenue when it sells 5 units, and $120 in revenue when it sells 6 units, then one can infer the firm is a(n):
A. perfect competitor. B. oligopolist. C. monopolist. D. monopolistic competitor.