Suppose that the effective return to a U.S. investor from buying a U.K. bond is 5.55%. Forward and spot exchange rates ($/£) are 2.10 and 2.00 respectively. The interest rate on the U.K. bond is most likely equal to:
A) 5.45%
B) 5.500%
C) 5.650%
D) 5.60%
B
You might also like to view...
According to this Application, which of the following is NOT a strategy that the government can pursue to address the rising cost of federal retirement and health care programs?
A) increase the age at which retirement benefits begin to be paid B) promote government saving and investment to increase real GDP over time C) borrow from the public to finance the programs D) reform the health care system to encourage more competition to reduce health care expenditures
Dependency theory characterizes countries as being either in the center or on the periphery. Explain these two concepts. If this theory is correct, what are the implications for development strategy?
What will be an ideal response?
Trade can increase the consumption possibilities of nations
a. True b. False Indicate whether the statement is true or false
?Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200. Which of the following is true in this case?
a. The budget deficit will decrease as the economy expands. b. ?There will be no change in the budget deficit. c. ?Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume. d. ?The budget deficit will increase by $200. e. ?The budget deficit will increase by $400.