Suppose that the six-month interest rate in the United States is 1%, while the six-month interest rate in Canada is 3%. Further, assume the spot rate of the Canadian dollar is $0.50. Given the spot rate of $0.50 of the Canadian dollar, as well as the premium of -1.9417% that you calculated previously, the six month forward rate of Canadian dollar should be about under IRP.

Suppose that the six-month interest rate in the United States is 1%, while the six-month interest rate in Canada is 3%. Further, assume the spot rate of the Canadian dollar is $0.50. Given the spot rate of $0.50 of the Canadian dollar, as well as the premium of -1.9417% that you calculated previously, the six month forward rate of Canadian dollar should be about under IRP.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 26QA

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