The current spot rate is C$1.373 and the one-year forward rate is C$1.313. The n

Question

The current spot rate is C$1.373 and the one-year forward rate is C$1.313. The nominal risk-free rate in Canada is 4 percent while it is 8 percent in the U.S. Using covered interest arbitrage you can earn an extra _____ profit over that which you would earn if you invested $1 in the U.S.

The current spot rate is C$1.373 and the one-year forward rate is C$1.313. The nominal risk-free rate in Canada is 4 percent while it is 8 percent in the U.S. Using covered interest arbitrage you can earn an extra _____ profit over that which you would earn if you invested $1 in the U.S.

Explanation / Answer

$0.035

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