Interest rate parity exists-risk-free security

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Reference no: EM13935159

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%

Reference no: EM13935159

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