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Exchange rate is currently $0.7 US per 1 Canadian dollar. Interest rate is 2% in the US and 1% in Canada. A bank has entered

Exchange rate is currently $0.7 US per 1 Canadian dollar. Interest rate is 2% in the US and 1% in Canada. A bank has entered a futures contract to buy 1,000,000 Canadian dollars for $700,000 U.S. in one year. Which of the following statements is correct?

a.

The bank has contracted to buy Canadian dollars below the expected future exchange rate

b.

The bank has contracted to buy Canadian dollars at the expected future exchange rate

c.

The bank has contracted to buy Canadian dollars above the expected future exchange rate

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