Suppose That the One-Year Risk-Free Interest Rate Is 5% in the United

question 77

Multiple Choice

Suppose that the one-year risk-free interest rate is 5% in the United States.The current spot rate is $0.7642/C$ and the one-year forward rate is $0.7834/C$.What must the Canadian one-year risk-free interest rate be in order for interest rate parity to hold?

• A) 0.929%
• B) 0.783%
• C) 2.43%
• D) 7.64%

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Definitions:

Reading

The process of recognizing and understanding the meaning of symbols and characters in written or printed material.

Corpus Callosum

The large band of neural fibers connecting the two hemispheres of the brain, facilitating communication and coordination between them.

Axon Fibers

Long, slender projections of nerve cells that transmit electrical impulses away from the neuron's cell body.

Cerebral Hemispheres

The two halves of the brain (right and left) that govern different functions, with the left typically managing logic and language, and the right more associated with creativity and spatial abilities.