Assume that Canada has a 1-year interest rate that is higher than the Japan. 1-year interest rate. Assume that you believe in the international Fisher effect (IFE) and interest rate parity.

Assume zero transaction costs. Jorge is based in the Japan and attempts to speculate by purchasing Canadian dollar today, investing the dollars in a risk-free asset for a year, and then converting the dollar to Yen at the end of 1 year. Jorge did not cover his position in the forward market.

Ava is based in Canada and attempts covered interest arbitrage by purchasing Yen today and simultaneously selling dollars 1 year forward, investing the Yen in a risk-free asset for a year, and then converting the Yen back to dollars at the end of 1 year.

Do you think the rate of return on Jorges investment will be higher than, lower than, or the same as the rate of return on Avas investment? Explain