Assume the Spot Rate on the Canadian Dollar Is C$0

question 43

Multiple Choice

Assume the spot rate on the Canadian dollar is C$0.9872.The risk-free nominal rate in the U.S.is 5.4 percent while it is only 4.2 percent in Canada.Which one of the following four-year forward rates best establishes the approximate interest rate parity condition?

• A)C$0.9407
• B)C$0.9608
• C)C$1.0267
• D)C$1.0519
• E)C$1.0597

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Definitions:

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Expense Warranty Accrual Method

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Modified Cash Basis

An accounting method that combines elements of both cash and accrual accounting, recognizing revenues when they are received and expenses when they are paid, with some adjustments.

Warranty Revenue Recognition

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