30. Suppose that the spot rate on the Canadian dollar is C$1.40/USs. The risk-free nomin in...

Question

Question

30. Suppose that the spot rate on the Canadian dollar is C$1.40/USs. The risk-free nomin in the U.S. is 8 percent while it is

Answer 1

Answer #1

As per Interest rate parity, Forward rate = spot rate(1+Interest rate canada)/(1+Interest Rate US)

= 1.40(1+4%)/(1+8%)

= C$1.348/Dollar

Hence, the closest answer is B. C$1.344/$

Answer 2

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