Assume the current spot rate is Can$.9892 and the 1-year forward rate is Can$.9901. The...

70.2K

Verified Solution

Question

Finance

Assume the current spot rate is Can$.9892 and the 1-year forward rate is Can$.9901. The nominal risk-free rate in Canada is 3.8 percent while it is 3.9 percent in the U.S. If an investor uses covered interest arbitrage, how much extra profit can he earn over that which he would earn if he invested $100 in the U.S. for one year?

Multiple Choice

$.23

$.19

$.04

$.16

$.02

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students