Use this date for the following questions

Spot (CAD/USD) = 1.75

1 Year Forward (CAD/USD) = 1.80

1 Year Canadian interest rate of 8% in Canadian Dollars (CAD)

1 Year U.S. interest rate of 4% in U.S. Dollars (USD)

1. The first step in the arbitrage trade is to borrow in ____ at the rate of _____.

A. USD, 4%

B. USD, 5%

C. USD, 8%

D. USD, 7%

E. CAD, 4%

F. CAD, 5%

G. CAD, 8%

H. CAD, 7%

2. The next step is to convert the borrowed money into ____ and invest it an account offering ____ interest rate.

A. USD, 4%

B. USD, 5%

C. USD, 8%

D. USD, 7%

E. CAD, 4%

F. CAD, 5%

G. CAD, 8%

H. CAD, 7%

3. In 1 year, you will have the proceeds from your loan. You will convert that at:

A. The spot rate in 1 year

B. The spot rate of 1.75

c. The forward rate of 1.8

4. Assuming you started with $1 million USD, what is your profit in USD in 1 year?