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Interest rates in the United States are 1% and in Canada they are currently at...

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Finance

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Interest rates in the United States are 1% and in Canada they are currently at 2%. The USD/CAD spot rate is 0.9881. You are offered a 12-month forward rate of 1.01. Calculate the theoretical forward rate implied by Interest Rate Parity. Is the forward contract relatively under-valued or over- valued? What is the percentage return from engaging in Covered Interest Arbitrage? (Calculate as a percentage of your initial borrowing, accurate to 4 decimal places)

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