Suppose in the spot market 1 U.S. dollar equals 1.7250 Canadian dollars. 6-month Canadian securities have an annualized return of 6.00% (and thus a 6-month periodic return of 3.00%). 6-month U.S. securities have an annualized return of 6.50% 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? In other words, how many Canadian dollars are required to purchase one U.S. dollar in the 180-day forward market? Do not round the intermediate calculations and round the final answer to four decimal places.

a.

1.8069

b.

1.8413

c.

1.8929

d.

1.4455

e.

1.7208