The Current Spot Rate Is C$1

question 337

Multiple Choice

The current spot rate is C$1.1578 and the one-year forward rate is C$1.1397. The nominal risk-free rate in Canada is 5 % while it is 6 % in the U.S. Using covered interest arbitrage you can earn an extra _____ profit over that which you would earn if you invested $1 in the U.S.

• A) $.0033
• B) $.0067
• C) $.0084
• D) $.0633
• E) $.0667

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Definitions:

External Constraints

Factors outside an individual or organization that limit or shape the options available for decision-making or actions.

Top Management Group

signifies the senior-most executives or administrators in an organization, responsible for strategic decision-making and overall management.

Clear Hierarchy

An organizational structure where roles, responsibilities, and levels of authority are well-defined and understood by all members.

CEO

Chief Executive Officer, the highest-ranking executive in a company, responsible for making major corporate decisions, managing overall operations, and acting as the main point of communication between the board of directors and corporate operations.