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3. Assume the following information: Spot rate of Canadian dollar = $.80 90-day forward rate of Canadian dollar = $.79 90-day Canadian interest rate =
3. Assume the following information: Spot rate of Canadian dollar = $.80 90-day forward rate of Canadian dollar = $.79 90-day Canadian interest rate = 4% 90-day US interest rate = 2.5% a. Explain the steps you would use in covered interest arbitrage with $1 million. b. What would be your profit?
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