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Suppose that the risk-free interest rate in the United States is 9% per annum with continuous compounding and that the risk-free interest rate in Canada
Suppose that the risk-free interest rate in the United States is 9% per annum with continuous compounding and that the risk-free interest rate in Canada is 7% per annum. The spot price of the Canadian dollar is U.S. $0.75. The futures price for a contract deliverable in three months is 0.74. What arbitrage opportunities does this create? (You have to describe your strategy in detail to get the total score.)
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