Assume the Current Spot Rate Is C$1

question 78

Multiple Choice

Assume the current spot rate is C$1.1875 and the one-year forward rate is C$1.1724.The nominal risk-free rate in Canada is 4 percent while it is 3 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)$0.018
• B)$0.023
• C)$0.029
• D)$0.031
• E)$0.035