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Suppose 1 U.S. dollar equals 1.65 Canadian dollars in the spot market. 6-month Canadian securities have an annualized return of 6% (and thus a 6-month

Suppose 1 U.S. dollar equals 1.65 Canadian dollars in the spot market. 6-month Canadian

securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month U.S.

securities have an annualized return of 6.5% and a periodic return of 3.25%. If interest rate parity

holds, what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward market?

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