entral The Canadian Dollar (CAD) has shown higher volatility in recent days. The spot rate is $0.6/CADT. Bank undertakes arbitrage transactions in CAD using a sum of $10 million. Annual interest rates are 10.9 per cent in Australia and 6.9 per cent in Canada. The bank can borrow or lend at these rates. Use interest rate parity theorem. 1) What is the expected net spread, if the forward rate is $0.64/CAD1? 2) At what forward rate will the arbitrage opportunity disappear? O a. 1) 1.88%; 2) $0.44/1CAD O b. 1) 4.06%; 2) $0.93/1CAD O c. None of the options is correct O d. 1) 3.13%; 2) $0.62/1CAD O e. 1) 2.66%; 2) $0.75/1CAD

The Canadian Dollar (CAD) has shown higher volatility in recent days. The spot rate is Bank undertakes arbitrage transactions in CAD using a sum of $10 million. Annual interest rates are 10.9 per cent in Australia and 6.9 per cent in Canada. The bank can borrow or lend at these rates. Use interest rate parity theorem. 1) What is the expected net spread, if the forward rate is $0.64/CAD1 ? 2) At what forward rate will the arbitrage opportunity disappear? a. 1) 1.88%;2)$0.44/1CAD b. 1) 4.06%; 2) $0.93/1CAD c. None of the options is correct d. 1) 3.13%; 2) $0.62/1CAD e. 1) 2.66%; 2) $0.75/1CAD