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Question 4 (20 marks) Suppose you have 100 Canadian dollars and you are provided with the following current spot rates: CAD/USD=1.3051, USD/GBP = 1.3562, CAD/GBP=1.7415.

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Question 4 (20 marks) Suppose you have 100 Canadian dollars and you are provided with the following current spot rates: CAD/USD=1.3051, USD/GBP = 1.3562, CAD/GBP=1.7415. Assume one year forward rate is CAD/USD=1.3231, and the nominal risk-free rate in Canada is 4.2 percent while it is 3.5 percent in the U.S. a. Please exploit the triangular arbitrage opportunity with these exchange rate (15 marks) b. Using covered interest arbitrage, what arbitrage profit will you earn if you invest the 100 Canadian dollars

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