Question
Quoted Price Spot rate of Canadian dollar $0.80 90 day forward rate of Canadian dollar $0.79 90 day Canadian interest rate 4% 90 day U.S.
Quoted Price
Spot rate of Canadian dollar $0.80 90 day forward rate of Canadian dollar $0.79 90 day Canadian interest rate 4% 90 day U.S. interest rate 2.5%
Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $1,000,000).
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Economics of Money Banking and Financial Markets
Authors: Frederic S. Mishkin
12th edition
134733821, 134733827, 9780134734507 , 978-0134733821
