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The six-month interest rate of Canadian dollar is 9 percent while the six-month interest rate for US dollar is 6.75 percent. At the same time,
The six-month interest rate of Canadian dollar is 9 percent while the six-month interest rate for US dollar is 6.75 percent. At the same time, the spot Canadian dollar quotation in New York is US$0.9100 and the six-month forward rate is US$0.9025. Required: e) Analyse the information provided above to answer the following questions: i) Critically evaluate whether there is interest rate parity in this situation. Provide relevant calculations to support your answer. ii) Critically discuss whether, and how, it might be possible to make a profit in this situation
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