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Detailed process and explanation required 7. Reviewing yesterday's market data, you compile the following: | United States Canada 4.50% 3-month interest rate (annualized) CAD/USD Spot

image text in transcribedDetailed process and explanation required

7. Reviewing yesterday's market data, you compile the following: | United States Canada 4.50% 3-month interest rate (annualized) CAD/USD Spot rate 90-day forward rate 3.00% 1.3015 1.3127 Absent transaction costs, what, if any, arbitrage opportunity does the above present? (15 marks) What is likely to reduce the opportunity? (5 marks) a. b

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