Question

Assume a risk-free asset in the U.S. is currently yielding 2.1 percent while a Canadian risk-free asset is yielding 2.6 perce
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Answer #1

IF INTEREST RATE PARITY HOLDS

FORWARD RATE IN 2 YEARS = SPOT RATE *(1+ RCAN - RUS)^2

FORWARD RATE IN 2 YEARS = 1.323*(1+0.026 - 0.021)^2 = 1.3363 (rounded to 4 decimals)

Answer : CAD 1.3363 (Thumbs up please)

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