Question: _________________________________________________________________________________________________________________________ QUESTION 2 Use the following information to answer the next two questions. The US dollar/Canadian dollar spot exchange rate is $.85lC$. The one year

_________________________________________________________________________________________________________________________ QUESTION 2 Use the following information to answer the next

_________________________________________________________________________________________________________________________

QUESTION 2 Use the following information to answer the next two questions. The US dollar/Canadian dollar spot exchange rate is $.85lC$. The one year US. interest rate is 8% and the one year interest rate in Canada is 10%. What is the one-year forward rate that should prevail according to IRP? (Assume the US is the home country and round intermediate steps to four decimals.) A $.1685/C$ A $.1318/C$ A $.8657/C$ A $.8345/C$ QUESTION 3 Suppose that the one year forward rate is $.82/C$. Find the prot (in terms of percentage returns) you could earn via covered interest arbitrage. Round intermediate steps to four decimals. Enter your answer in decimal format. (EX: .XXXX)

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