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The spot exchange rate for Canadian dollars is $C1.33/$US. Dollars six-month interest rate one-year...

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Finance

The spot exchange rate for Canadian dollars is $C1.33/$US.

Dollars six-month interest rate one-year interest rate

Canada 2% 2.5%

U.S. 2.5% 2.75%

a. What is the six-month fair forward exchange rate?

b. Is the Canadian dollar a discount or premium currency vs. the United States dollar?

c. What does it cost in U.S. dollars to purchase $C1,000 now?

d. How many Canadian dollars will you receive by entering a six-month forward contract to sell $1,000?

e. What will it cost in Canadian dollars to purchase $US1,000 in six months via a forward contract?

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