Canadian dollar (C$) Carry Trade. You are interested in conducting a carry trade with the Canadian dollar (C$) as the funding currency and the US dollar as the target currency. Market rates are currently:

1-yr Canadian dollar interest rate: 2%

1-yr US dollar interest rate: 5%

Current exchange rate: $1.02/C$

You borrow C$1,000,000 to fund a long position in US dollars. What are the profits (in US dollars) of this currency trading strategy if one year from now the exchange rate is $1.049/C$? (Please round to the nearest whole number).

• A.

  $1,071,000

• B.

  $1,020

• C.

  $972

• D.

  None of the above