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can u explain the steps and how you get the answer? II. (25 points) Suppose that the annual interest rate is 5 percent in the

can u explain the steps and how you get the answer?

II. (25 points) Suppose that the annual interest rate is 5 percent in the United States and 8 percent in Canada, and that the spot exchange rate is USD 0.7869/CAD and the forward exchange rate, with one-year maturity, is USD0.7867/CAD. Assume that you can borrow up to opportunity, if any. Compute the arbitrage profit. step 1

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