Suppose the spot rate on the Canadian dollar is C$1.2797.Also assume the risk-free nominal rate in the U.S.is 3.8 percent while it is only 3.3 percent in Canada.Which one of the following three-year forward rates best establishes the approximate interest rate parity condition?
A) C$1.2733
B) C$1.2606
C) C$1.2861
D) C$1.2990
E) C$1.1918
Correct Answer:
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