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Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$): Spot Exchange Rate 0.8711 One-Year
Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar (C$): Spot Exchange Rate 0.8711 One-Year Forward Exchange Rate 0.8903 Canadian dollar (U.S. dollar/Canadian dollar) The current one-year interest rate on us. Treasury securities is 6.35%. If interest rate parity holds, what is the expected yield on one-year Canadian securities of equal risk? 4.06% 3.45% 4.26% 4.47% Which of the following statements is implied by interest rate parity theory? O Interest rates in all countries with the same political risk should be the same. O If two countries have the same inflation rate, they should have the same interest rate, too. O An investment in one's home country should have the same return as a similar investment in a foreign country. O Interest rates in all countries should be the same
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