Suppose That the Spot Rate on the Canadian Dollar Is

question 15

Multiple Choice

Suppose that the spot rate on the Canadian dollar is C$1.40. The risk-free nominal rate in the U.S. is 8 percent while it is only 4 percent in Canada. Which one of the following one-year forward rates best establishes the approximate interest rate parity condition?

• A) C$1.278
• B) C$1.344
• C) C$1.355
• D) C$1.456
• E) C$1.512

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