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Suppose in the spot market one Canadian dollar equals 0.7273 U.S. dollars. Six-month Canadian securities have an annualized return of 6.00% (i.e., the semiannual return
Suppose in the spot market one Canadian dollar equals 0.7273 U.S. dollars. Six-month Canadian securities have an annualized return of 6.00% (i.e., the semiannual return is 3.00%). Six-month U.S. securities have an annualized return of 6.50% (i.e., the semiannual return is 3.25%). Assume that interest rate parity holds. What is the six-month forward exchange rate in terms of Canadian dollars per one U.S. dollar? Round calculations to four decimal places.
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1.4863
1.5774
1.3717
1.4056
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