Suppose That the Spot Rate on the Canadian Dollar Is

question 28

Multiple Choice

Suppose that the spot rate on the Canadian dollar is C$1.18.The risk-free nominal rate in the U.S.is 5 percent while it is only 4 percent in Canada.Which one of the following three-year forward rates best establishes the approximate interest rate parity condition?

• A)C$1.120
• B)C$1.145
• C)C$1.192
• D)C$1.216
• E)C$1.239

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