Question: The current exchange rate between the U.S. dollar and the British pound is $1.40 = 1 British pound. The one-year forward exchange rate is $1.373

The current exchange rate between the U.S. dollar and the British pound is $1.40 = 1 British pound. The one-year forward exchange rate is $1.373 = 1 British pound. If the British one-year risk-free interest rate is 4%, the interest rate parity relationship implies that the U.S. one-year risk-free interest rate is _____.

4.5%

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