You just moved from the United States to the United Kingdom to go to school at the University of Bristol for 8 months (2

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You Just Moved From The United States To The United Kingdom To Go To School At The University Of Bristol For 8 Months 2 1 (36.8 KiB) Viewed 9 times

You just moved from the United States to the United Kingdom to go to school at the University of Bristol for 8 months (240 days). Upon opening a bank account, you realise that interest rates here are much higher than they are in the United States. Lucky for you, you don't need to incur any debt while you are in the United Kingdom. However, you will need to invest some money. You have two options: you can either invest in the United States where annualised 8 month rates are currently 3.9% or you can convert your U.S dollars into British pounds (with a current spot rate of USD0.8466/GBP and invest in an annualised 8 month rate of 7.6%. Given this information, what is the annualised forward premium or discount that the British pound should trade at against the U.S dollar in the 240-day forward market as implied by interest rate parity? 3.52% discount O b. 3.61% premium O c. 3.61% discount O d. 3.56% premium O e. 3.44% discount a.