What is the spot exchange rate

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Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return. In the 90-day forward market, 1 British pound equals $1.50. If interest rate parity holds, what is the spot exchange rate ($/£)?

a)$1.5074
b)$1.4019
c)$1.4924
d)$1.5376
e)$1.7185

 

Reference no: EM13305487

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