The 1-Year Interest Rate in the U

question 29

Multiple Choice

The 1-year interest rate in the U.S.is 1%.The spot exchange rate for Canadian dollars 1.007 to the U.S.dollar.The 6 months forward rate is 1.0068 to the U.S.dollar.These prices indicate that interest rates in Canada,on an annualised basis,are about

• A).08% lower.
• B).08% higher.
• C).04% higher.
• D).8% lower.

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Definitions:

Infinite Population

An idealized concept of a population so large that its size is not diminished by the sampling process.

Standard Deviation

An estimator for the amount of disparity or spread found in a set of numerical values.

Sample Mean

The average value of a subset of a larger population, used to estimate the population mean.

Finite Population Correction

A statistical adjustment applied when sampling without replacement from a finite population, to improve the accuracy of estimates like means and proportions.