Require conversion of dollars to british pounds

Reference no: EM131042881

Effective Yield Rollins, Inc., has $3 million in cash available for 180 days. It can earn 7 percent on a U.S. Treasury bill or 9 percent on a British Treasury bill. The British investment does require conversion of dollars to British pounds. Assume that interest rate parity holds and that Rollins believes the 180-day forward rate is a reliable predictor of the spot rate to be realized 180 days from now. Would the British investment provide an effective yield that is below, above, or equal to the yield on the U.S. investment? Explain your answer.

Reference no: EM131042881

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