Assume the Spot Rate on the Canadian Dollar Is C$1

question 59

Multiple Choice

Assume the spot rate on the Canadian dollar is C$1.2648, the risk-free nominal rate in the U.S. is 3.3 percent, and the risk-free nominal rate in Canada is 3.8 percent. What one-year forward rate will create interest rate parity?

• A) C$1.2362
• B) C$1.2429
• C) C$1.2709
• D) C$1.2587
• E) C$1.2515

---

Definitions:

Prepositional Phrases

Groups of words in a sentence made up of a preposition and its object, functioning as modifiers or complements.

Obey

To follow the directions or commands given by someone in authority.

Tie Shoelaces

A manual skill involving the tying of laces on shoes, typically learned in early childhood as part of developing fine motor abilities.

Conservation Of Matter

A fundamental principle of classical physics that states that matter cannot be created or destroyed in an isolated system.