International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Assuming that existing U.S. one year interest rate is 8% and the Canadian one-year interest rate is 9%. Also assume that interest rate parity exists. Should the forward rate of the Canadian dollar exhibit a discount or a premium? If U.S. investors attempt covered interest arbitrage, what will be their return? If Canadian investors attempt covered interest arbitrage what will be their return?
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