Assume that U$.$S$.$ interest rates for the next three years are $5$ percent, $6$ percent, and $7$ percent, respectively. Also

assume that Canadian interest rates for the next three years are $3$ percent, $5$ percent, and $8$ percent. More precisely,

the one$-$year USD interest rate for the first year is $5\%,$ the one$-$year US interest rate for the second year is $6\%$ and the

one$-$year US interest rate for the third year is $7\%.$ Similarly for the CAD interest rates. $($Usually we don't know what

the one$-$year rate will be in future periods, but just assume that we know it in this question$)$

The current Canadian spot rate is $$\frac{0\mathrm{.}840}{C}AD.$ What is the arbitrage free $3-$year forward rate?

a$.$ $$\frac{0\mathrm{.}8565}{C}AD$

b$.$ $$\frac{0\mathrm{.}8405}{C}AD$

c$.$ $$\frac{0\mathrm{.}8905}{C}AD$

d$.$ $$\frac{0\mathrm{.}8545}{C}AD$