The Interest Rate on a 1-Year Canadian Security Is 8

question 30

Multiple Choice

The interest rate on a 1-year Canadian security is 8%. The current exchange rate is C$ = US $0.78. The 1-year forward rate is C$ = US $0.76. The return (denominated in U.S. $) that a U.S. investor can earn by investing in the Canadian security is

• A) 3.59%.
• B) 4.00%.
• C) 5.23%.
• D) 8.46%.
• E) None of the options are correct.

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Definitions:

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The process of adding interest or finance charges to the amount owed by a borrower over time, based on the agreement's terms.

Interest Revenue

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