Suppose That the Spot Rate on the Canadian Dollar Is

question 40

Multiple Choice

Suppose that the spot rate on the Canadian dollar is C$1.15.The risk-free nominal rate in the U.S.is 5% while it is only 4% in Canada.Which one of the following three-year forward rates best establishes the approximate interest rate parity condition?

• A)C$1.116
• B)C$1.125
• C)C$1.132
• D)C$1.146
• E)C$1.159

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