a. -5.5%

b. 5.5%

c. -6.5%

d. 6.5%

e. None of the above

Please include calculations

Suppose that a U.S. FI has the following assets and liabilities: The promised one-year U.S. CD rate is 5 percent, to be paid in dollars at the end of the year; the one-year, default risk-free loans in the United States are yielding 6 percent; and default risk-free one-year loans are yielding 12 percent in the United Kingdom. The exchange rate of dollars for pounds at the beginning of the year is $1.65/1. The rate of return from foreign investment if the spot foreign exchange rate falls to $1.35/1 over the year is