Nominal annual interest rate on default-free british bonds

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1. The nominal annual interest rate on 6-month U.S. Treasuries is 0.10% (i.e., the semiannual return is 0.05%). The spot rate of the British pound is $1.6254 (£0.6152 per U.S. dollar) and the 6-month forward rate of the British pound is $1.5886 (£0.6295 per U.S. dollar). If interest rate parity holds, what is the nominal annual interest rate on default-free 6-month British bonds?

2. The nominal annual interest rate on 6-month U.S. Treasuries is 0.02% (i.e., the semiannual return is 0.01%). The spot rate of the British pound is $1.8771 (£0.5327 per U.S. dollar) and the 6-month forward rate of the British pound is $1.7996 (£0.5557 per U.S. dollar). If interest rate parity holds, what is the nominal annual interest rate on default-free 6-month British bonds?

Reference no: EM131863354

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