Suppose that the spot rate on the Canadian dollar is C$1.40. The risk-free nominal rate in the U.S. is 8 percent while it is only 4 percent in Canada. Which one of the following one-year forward rates best establishes the approximate interest rate parity condition?
A) C$1.278
B) C$1.344
C) C$1.355
D) C$1.456
E) C$1.512
Correct Answer:
Verified
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