On the basis of your answer to the previous question, is the Canadian dollar selling at a
Question:
On the basis of your answer to the previous question, is the Canadian dollar selling at a premium or discount on the forward rate?
Previous question
Assume that 90-day U.S. securities have a 3.5% annualized interest rate, whereas 90-day Canadian securities have a 4% annualized interest rate. In the spot market, 1 U.S. dollar can be exchanged for 1.4 Canadian dollars. If interest rate parity holds, what is the 90-day forward exchange rate between U.S. and Canadian dollars?
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Related Book For 
Fundamentals Of Financial Management
ISBN: 9780357517574
16th Edition
Authors: Eugene F. Brigham, Joel F. Houston
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