The Current Spot Rate Is C$1

question 319

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 percent while it is 6.5 percent 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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Definitions:

Single-Phase System

A system in which the customer receives service from only one station and then exits the system.

Interarrival Time

The duration of time between the arrival of one entity and the next in a queue or system.

Random Number Intervals

involves generating intervals based on random numbers for various purposes, such as simulations in operations research or statistical sampling.

Weekly Demand Distribution

The variance of demand for a product or service over the course of a week, illustrating how customer needs fluctuate within this timeframe.