Assume that an investor can invest in Canadian or US assets. Current interest rate in

Canada and Us are $3\mathrm{.}25\%$ and $4\mathrm{.}25\%$ respectively. Current spot exchange rate is

CD$$1\mathrm{.}32/$US$$,$ and one year forward exchange rate is CD$$1\mathrm{.}28/$US$$.$ If the investor

believe that the current forward exchange rate will be the future exchange rate after one

year, do you think this investor should invest in Canadian assets? Explain why or why

not. $[$Show all your works$](5$ marks