If the Exchange Rate Between the Canadian Dollar and the American

question 73

Essay

If the exchange rate between the Canadian dollar and the American dollar was fixed at 1.30
Canadian dollars per U.S. dollar and investors perceived Canadian bonds to be equal in value and risk to U.S. bonds, if the U.S. bonds are selling for $1,000 and have a 5 percent interest rate, assuming capital flows freely between the two countries what will be the price and the interest rate of the Canadian bonds?

---

Definitions:

Morpheme

The smallest grammatical unit in a language, incapable of further division, that carries meaning; examples include root words, prefixes, and suffixes.

Syntax

The set of rules, principles, and processes that govern the structure of sentences in a given language, including word order and sentence organization.

Phoneme

A Phoneme is the smallest unit of sound in a language that can distinguish meaning between words.

Preference

A greater liking for one alternative over another or others.