Answer : the minimum yield on a 1-year risk-free security in Britain that would induce a U.S. investor to invest in the British security = 7%

Working notes for the above answer is as under

We have provided with the information that,

risk-free rate of return in the U.S. is 5%.

current exchange rate is 1 pound = U.S. $1.60.

The 1-year forward rate is 1 pound = $1.57.

Now we will calculate yeild as follow

1.05 = (1 + r) X [1.57/1.60] – 1

; r = 7.0

the minimum yield on a 1-year risk-free security in Britain that would induce a U.S. investor to invest in the British security is 7%