The Spot Rate of the U

question 73

Multiple Choice

The spot rate of the U.S. dollar is C$1 = $.94US while the forward rate for one year is C$1 = $.92US. The nominal risk-free rate is 3% in the U.S. and 2% in Canada. How much profit can you make given
This situation using covered interest arbitrage?

• A) -$.04
• B) -$.01
• C) $.01
• D) $.03
• E) $.05

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