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The one-year interest rate is 4.25% in Canada and 2.5% in France. The spot price of one Euro today is $1.4 Canadian. The known one-year

The one-year interest rate is 4.25% in Canada and 2.5% in France. The spot price of one Euro today is $1.4 Canadian. The known one-year forward price of a Euro today is $1.48 Canadian.

a. What is the expected value of the Euro in a year?

b. What is the expected percentage appreciation or depreciation of the Euro?

c. What arbitrage profits are possible with an investment of $2 million?

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