The Nominal Interest Rate in the U

question 35

Essay

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).Calculate the forward discount or premium for the dollar.Does the interest parity condition hold? If not explain what is likely to occur in foreign exchange markets.Assume that interest rates cannot change.

---

Definitions:

Chief Financial Officer

The senior executive responsible for managing the financial actions of a company, including financial planning, risk management, and financial reporting.

Certify

To officially recognize, verify, or endorse something as true, valid, or in compliance with a standard.

Federal Law

Legislation enacted by the national government of a country and applicable throughout its jurisdiction.

Insider Trading

The illegal buying or selling of a publicly-traded company's stock by someone who has non-public, material information about that stock.