1) Interest rate in the U.S. = 7.0%. Interest rate in the Canada = 5.00%. What should the current forward premium in the market for CAD be according to Interest Rate Parity? Please use the exact, not the approximate formula to answer

a) 98.11%

b) 1.90%

c) - 1.87%

d) 1.02%

2) Suppose you have a credit line of $10,000,000 in the US and CAD 12,500,000 in Canada, and that you can borrow and lend at the prevailing rates of interest in these two countries. Current spot rate of CAD = $0.800. Interest rate in the U.S. = 7.0%. Interest rate in the Canada = 5.00%. If the 1-year current forward rate for CAD is $0.825, your covered interest arbitrage profit will be:

Group of answer choices

a) $518,182

b) $124,242

c) $341,775

d) $128,125