The Current Spot Rate Is C$1

question 47

Multiple Choice

The current spot rate is C$1.362 and the one-year forward rate is C$1.371. The nominal risk-free rate in Canada is 6 percent while it is 3.5 percent in the U.S. Using covered interest arbitrage you can earn an extra _____ profit over that which you would earn if you invested $1 in the U.S.

• A) $.0018
• B) $.0045
• C) $.0120
• D) $.0180
• E) $.0240

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Definitions:

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A statistical method used to estimate the causal effect of a treatment by assigning a cutoff point and analyzing the outcomes immediately above and below that cutoff.

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The minimum level of stimulus required to achieve a response or action, or the point at which a significant change occurs.

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A tax imposed on the use or consumption of certain products or services.