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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? Enter your answer rounded to four decimal places. For example, if your answer is 12.34567 then enter as 12.3457 in the answer box.
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