If the current exchange rate is $1.95/£, the 1-year forward exchange rate is $2.05/£, and the interest rate on British government bills is 7% per year, what risk-free dollar-denominated return can be locked in by investing in the British bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN:9781285867977
Author:Eugene F. Brigham, Joel F. Houston
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Chapter19: Multinational Financial Management
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Problem 25-7
If the current exchange rate is $1.95/£, the 1-year forward exchange rate is $2.05/£, and the interest rate on British government bills is
7% per year, what risk-free dollar-denominated return can be locked in by investing in the British bills? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Risk-free dollar-denominated return
%
Transcribed Image Text:Problem 25-7 If the current exchange rate is $1.95/£, the 1-year forward exchange rate is $2.05/£, and the interest rate on British government bills is 7% per year, what risk-free dollar-denominated return can be locked in by investing in the British bills? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Risk-free dollar-denominated return %
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