1. Consider the following prices for government bonds and foreign exchange in Canada and the United States. Assume that both government securities are one-year bonds, paying the face value of the bond one year from now. The exchange rate E stands at US$1 = C$0.95. The face values and prices on the two bonds are given by: Face Value C$10,000 Price C$9,523.81 Canada 1-year bond United States 1-year bond US$13,714 US$12,698.15 a. Compute the nominal interest rate on each of the bonds. (6 points) b. Using the exact version of the uncovered interest parity condition, what is the expected depreciation of Canadian dollar? (6 points) c. Compute the expected exchange rate next year consistent with the exact version of uncovered interest parity. (6 points) d. If you expect the Canadian dollar to depreciate relative to the American dollar, which bond should you buy? Explain clearly. (6 points)