Suppose That the Risk-Free Rates in the United States and in the Canada

question 3

Multiple Choice

Suppose that the risk-free rates in the United States and in the Canada are 5% and 3%, respectively.The spot exchange rate between the dollar and the Canadian dollar (C$) is $0.80/C$.What should the futures price of the C$ for a one-year contract be to prevent arbitrage opportunities, ignoring transactions costs.

• A)$1.00/C$
• B)$0.82/ C$
• C)$0.88/ C$
• D)$0.78/ C$
• E)$1.22/ C$

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