PPP and Currency Futures Assume that you believe purchasing power parity exists. You expect that inflation in Canada during the next year will be 3 percent and inflation in the United States will be 8 percent. Today the spot rate of the Canadian dollar is $0.90 and the one-year futures contract of the Canadian dollar is priced at $0.88. Estimate the expected profit or loss if an investor sold a one-year futures contract today on 1 million Canadian dollars and settled this contract on the settlement date.
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