Assume the Current Spot Rate Is C$1

question 24

Multiple Choice

Assume the current spot rate is C$1.0875 and the one-year forward rate is C$1.0724. Also assume the nominal risk-free rate in Canada is 3.9 percent while it is 4.1 percent in the U.S. How much additional income can you earn by using covered interest arbitrage as compared to investing $1 in the U.S for one year?

• A) $.0118
• B) $.0126
• C) $.0020
• D) $.0110
• E) $.0087

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Definitions:

Shared Values

Represents the common core beliefs or principles that members of an organization or society hold as important.

High-Performance Task Forces

Specialized teams designed to focus on critical tasks, characterized by high levels of collaboration, expertise, and efficiency, driving superior results.

Strong Subcultures

Subgroups within an organization or society with distinct values and norms that strongly influence their members.

Allocate Power

The process of distributing authority and control among various individuals or groups in an organization or system.