The Nominal Interest Rate in the U

question 6

Multiple Choice

The nominal interest rate in the U.S.is 5% and the nominal interest rate in Canada is 3%.The spot value of the U.S.dollar is 1 ($/Canadian dollar) and the forward rate is 1.2 ($/Canadian dollar) .Which of the following is NOT true?

• A)The dollar is likely to appreciate in spot markets.
• B)The interest parity condition does not hold.
• C)The dollar is trading at a forward discount.
• D)Money will flow into the Canada.

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