A Risk-Free Asset in the U

question 81

Multiple Choice

A risk-free asset in the U.S.is currently yielding 4 percent while a Canadian risk-free asset is yielding 2 percent.Assume the current spot rate is C$1.2103.What is the approximate three-year forward rate if interest rate parity holds?

• A)C$1.1391
• B)C$1.1744
• C)C$1.2241
• D)C$1.2295
• E)C$1.2470

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Definitions:

Ambiguous Situations

Scenarios or events that lack clear context or guidelines, leading to uncertainty in perception or decision-making.

Pluralistic Ignorance

A psychological state where individuals wrongly believe their thoughts, feelings, or behaviors are different from those of the majority, often leading to conformity with perceived norms.

Informational Influence

This occurs when an individual conforms to a group's behavior under the assumption that the group possesses more accurate information.

Private Acceptance

The genuine alignment of one's internal beliefs or attitudes with those of a group, without external pressure.