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Please solve the following: Question 5 (2 points): Anne, who is a Canadian saver, would like to invest $65,000 dollars (Canadian dollars to be precise).
Please solve the following:
Question 5 (2 points): Anne, who is a Canadian saver, would like to invest $65,000 dollars (Canadian dollars to be precise). She is considering two options, buying a Canadian discount bond or a Russian discount bond, and Anne would like you compare returns on both options. The world risk-free rate is 0.25%. There is no risk premium on the Canadian discount bond, and the risk premium on the Russian discount bond is 5%. The current nominal Russian-Canadian exchange rate is ecan=56 Rubbles (Rubbles per Canadian dollar). Before the pay-out next period, you expect (and of course, Anne agrees with you), Rubbles will depreciate relative to Canadian dollar, efuture=60 Rubbles (again, Rubbles per Canadian dollar). Based on your forecast, what is the expected rate of return (% yield) on each investment. For simplicity, please assume zero transaction costs and no difference in taxes (zero taxes on both options). Please note, to get full points, you need to show all your stepsStep by Step Solution
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