Assume the spot rate on the Canadian dollar is C$0.9872.The risk-free nominal rate in the U.S.is 5.4 percent while it is only 4.2 percent in Canada.Which one of the following four-year forward rates best establishes the approximate interest rate parity condition?
A) C$0.9407
B) C$0.9608
C) C$1.0267
D) C$1.0519
E) C$1.0597
Correct Answer:
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