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10.11 (a) Smith has 10,000 U.S. dollars. He can buy Canadian dollars today at the...

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10.11 (a) Smith has 10,000 U.S. dollars. He can buy Canadian dollars today at the exchange rate of 1 U.S. = 1.38 CDN., or he can signa forward contract guaranteeing him an exchange rate of 1 U.S. = 1.42 CDN one year from now. If he exchanges his U.S. dollars for Canadian dollars today, he can earn interest at effective annual rate 9% on his Canadian dollars. Alternatively, he can sign the forward exchange rate contract and invest his 10,000 U.S. at effective annual rate i, exchanging his U.S. dollars for Canadian dollars next year. If he ends up with the same amount of Canadian funds in one year either way, what is

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