If the current exchange rate is $1.95/£, the 1-year forward exchange rate is $2.05/£, and the interest rate on British government bills is 7% per year, what risk-free dollar-denominated return can be locked in by investing in the British bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

If the current exchange rate is $1.95/£, the 1-year forward exchange rate is $2.05/£, and the interest rate on British government bills is 7% per year, what risk-free dollar-denominated return can be locked in by investing in the British bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 26QA

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