Given the information:

Interest rate in US $($Rh$)$:$7\%$Interest rate in Canada$($Rh$)$:$5\%$Line of credit in USUSD $10,000,000$Line of credit in CanadaCAD $12,500,000$The spot rate for CAD $($S$0)$:$$0\mathrm{.}801-$year forward rate for CAD $($FR$)$:$$0\mathrm{.}82$

$$

What is your covered rate of return from US $($Rch$)?$

$$

$2\mathrm{.}439\%$

$$

$4\mathrm{.}390\%$

Correct Answer

$$

$7\mathrm{.}625\%$

$$

$9\mathrm{.}675\%$