Is the 12-month u.s. risk-free interest rate above

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Reference no: EM13304865

Assume that interest rate parity (IRP) exists. Assume this information provided by today's Wall Street Journal:

Spot rate of British pound = $1.80
6-month forward rate of pound = $1.82
12-month forward rate of pound = $1.78

a. Is the annualized 6-month U.S. risk-free interest rate above, below, or equal to the British risk-free interest?

b. Is the 12-month U.S. risk-free interest rate above, below, or equal to the British risk-free interest rate?

Reference no: EM13304865

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