1) Given the information:

Interest rate in US (Rh) 4%

Interest rate in Canada (Rh): 6%

Line of credit in US USD 10,000,000

Line of credit in Canada CAD 12,500,000

The spot rate for CAD (SR0): $0.80

if your forecast tells you that the spot rate of cad one year later (SR1) will be $0.775 then you recommended investement strategy should earn a net profit of

a) USD 250000

b) 200000

c) 169355