Suppose That the Spot Rate on the Canadian Dollar Is

question 88

Multiple Choice

Suppose that the spot rate on the Canadian dollar is C$1.18. The risk-free nominal rate in the U.S. is 5 percent while it is only 4 percent in Canada. Which one of the following three-year forward rates best establishes the approximate interest rate parity condition?

• A) C$1.120
• B) C$1.145
• C) C$1.192
• D) C$1.216
• E) C$1.239

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