The 1-Year Forward Rate for Hong Kong Dollars HK$7

question 92

Multiple Choice

The 1-year forward rate for Hong Kong dollars HK$7.27 per $1. The rate on a risk-free Hong Kong asset is 5%. The spot rate is HK$7.98 per $1. Approximately what rate can you earn by investing in
The Canadian risk-free security for one year?

• A) 11.87%
• B) 12.13%
• C) 13.00%
• D) 13.12%
• E) 14.77%

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Definitions:

Karl Marx

A 19th-century philosopher, economist, and socialist who analyzed the effects of capitalism and proposed a revolutionary class struggle leading to a society with no class distinctions.

Public Ownership

Ownership of assets by the government or a government entity, rather than by private individuals or organizations.

Laissez-faire

An economic system in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, and tariffs.

Capitalist Economy

An economic system where private individuals and business owners control the production, distribution, and exchange of goods and services, typically driven by profit motives.