The spot rate between Canada and the U.S. is C$1.2381 = $1, while the 1-year forward rate is C$1.2379 = $1. The risk-free rate in Canada is 2.8 percent. The risk-free rate in the U.S. is 3.6 percent. How much profit can you earn on a loan of $10,000 by utilizing covered interest arbitrage?
A) -$81.42
B) -$78.34
C) -$53.60
D) $34.91
E) $65.07
Correct Answer:
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