Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the current spot price of the british pound in usd

The current spot price of the British Pound in USD is USD 1.25. The USD...

80.2K

Verified Solution

Question

Finance

The current spot price of the British Pound in USD is USD 1.25. The USD risk-free rate is 2% while the British Pound risk-free rate is 3% for all maturities. Both rates are annual and continuously compounded. a) Calculate the futures price of the British Pound in USD for delivery in six months. b) Given the same spot rate and the same British Pound risk-free rate, calculate the implied annual risk-free rate in USD if the price of the equity futures contract in a) is 1.245. c) How would an investor construct a portfolio to earn this rate of return?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students