The Current Spot Rate Is C$1

question 281

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 7 % while it is 6.5 % 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) $.0022
• B) $.0025
• C) $.0220
• D) $.0239
• E) $.0250

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