Question: pls help me with the question below, thank you very much! Question 1: [10 marks] Consider the following prices for government bonds and foreign exchange

pls help me with the question below, thank you very much!

pls help me with the question below, thank you very much! Question

Question 1: [10 marks] Consider the following prices for government bonds and foreign exchange in Canada and the United States. Assume that both government securities are one-year bonds, paying the face value of the bond one year from now. The exchange rate, E, stands at US$1.00 = 0130.95. The face values and prices on the two bonds are given by [Blanchard and Johnson (2015), p. 124, question 3]: Face Value Price Canada 1year bond C$10, 000 O$9, 615.38 United States 1year bond U S$13. 333 US$12, 698.10 1. Compute the nominal interest rate on each of the bonds. 2. Compute the expected exchange rate next year consistent with uncovered interest parity. 3. If you expect the Canadian dollar to depreciate relative to the American dollar, which bond should you buy? 4. Assume you are a Canadian investor. You exchange your dollars for US. dollars and purchase the American bond. One year from now, it turns out that E is actually 0.90(US$1.00 = 0330.90). What is your realized return in Canadian dollars compared with the realized return you would have made had you held the Canadian dollar bond? 5. Are the differences in returns in (4) consistent with the uncovered interest parity con dition? Why or why not

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