1. Assume that you face the following money-market and exchange-rate quotations:

a. If r$ and rC$ are respectively the per annum six-month US dollar and Canadian dollar borrowing rates facing a US firm that wishes to remain hedged, should that firm borrow in US or Canadian dollars?

b. If r$ and rC$ are respectively the per annum interest rates available on six-month US and Canadian treasury bills, in which country should a US firm place its funds?

Transcribed Image Text:

S(C$/ask$) S(C$/bid$) F (C$/ask$) F (C$/bid$) 's rc$ 4.20% 6.40% 1.0850 1.0830 1.1000 1.0960