A Risk-Free Asset in the U

question 83

Multiple Choice

A risk-free asset in the U.S. is currently yielding 3 % while a Canadian risk-free asset is yielding 2 %. The current spot rate is C$.92 is equal to US$1. What is the approximate two-year forward rate if interest rate parity holds?

• A) C$.9017
• B) C$.9088
• C) C$.9136
• D) C$.9189
• E) C$.9272

Understand the concept of normal distribution.

Calculate probabilities for specified values within a normal distribution.

Determine cutoff points based on specific percentage criteria within a normal distribution.

Understand the impact of changing mean values on normal distribution and calculations.

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Definitions:

Matured

Used to describe financial instruments or investments that have reached their due date for payment or realization.

Investment

Allocation of resources, usually money, with the expectation of generating an income or profit.

Income Tax Overpayment

A situation where an individual or entity has paid more income tax to the government than was actually owed.

Canada Revenue Agency

The federal agency responsible for administering tax laws and various social and economic benefit and incentive programs delivered through the tax system for the Government of Canada.