You are receiving CAD 500,000 one year from today, but you would prefer USD. The current spot rate is CAD 0.75 per USD, and the one year forward rate is CAD 0.80 per USD. Riskless Canadian debt pays 4% annually.

If the Law of One Price holds, what return would you expect on riskless US debt?

If US riskless debt actually pays 8%, what would be the best way to hedge your exposure to the US/CAD exchange rate? Assume you may enter into forward contracts and borrow or lend at the riskless rate.