If one year U.S. nominal interest rates are 4 percent, one year Canadian nominal interest rates are 7.5 percent, and the current spot exchange rate, S₀, is $0.587, then the expected spot rate in one year will be:

Name: If one year U.S. nominal interest rates are 4 percent, one year Canadian nominal interest rates are 7.5 percent, and the current spot exchange rate, S 0 , is $0.587, then the expected spot rate in one year will be:
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Solution: S₁/$0.587=1.04/1.075 S₁=$0.568

If One Year U