Question
The spot rate between Canada and the U.S. is C$1.0625 = $1, while the 1-year forward rate is C$1.0451 = $1. The risk-free rate in
The spot rate between Canada and the U.S. is C$1.0625 = $1, while the 1-year forward rate is C$1.0451 = $1. The risk-free rate in Canada is 4%. The risk-free rate in the U.S. is 4.5%. How much profit can you earn on a loan of $5,000 by utilizing covered interest arbitrage?
| a. | $63.07 | |
| b. | $59.29 | |
| c. | $61.58 | |
| d. | $56.08 |
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
