A Risk-Free Asset in the U

question 20

Multiple Choice

A risk-free asset in the U.S. is currently yielding 3 percent while a Canadian risk-free asset is yielding 2 percent. The current spot rate is C$.72 is equal to $1. What is the approximate two-year forward rate if interest rate parity holds?

• A) C$.7057
• B) C$.7128
• C) C$.7136
• D) C$.7189
• E) C$.7272

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Definitions:

Spinal Cord

The long, thin, tubular structure made up of nervous tissue that extends from the brain, encased within the spine, facilitating communication between the brain and the rest of the body.

Cerebellum

The cerebellum is a section of the brain located at the back and lower part of the skull which coordinates voluntary movements, maintains posture, and balances.

Coordinating Movements

The process through which the body's muscular, skeletal, and nervous systems work together to execute complex motor tasks.

Cerebral Cortex

The outer layer of the cerebrum, responsible for higher brain functions such as thought, language, and decision making.