Assume the current spot rate is C$1.0875 and the one-year forward rate is C$1.0724. The nominal risk-free rate in Canada is 4 percent while it is 3 percent in the U.S. Using covered interest arbitrage you can earn an extra profit over that which you would earn if you Invested $1 in the U.S. $.0246 $.0310 $.0035 $.0029 $.0018