Suppose the risk-free rates in the United States and the United Kingdom are 2% and 1%, respectively. The spot exchange rate between the dollar and the pound is $1.20/GBP. Assuming interest rates are compounded separately, what should the futures price of sterling be for a one-year contract to avoid arbitrage opportunities while ignoring transaction costs?

Answer rating: 100% (QA)

Given To determine the futures price of sterling for a oneyear contrac... View the full answer