Question: Suppose that the current one - year risk - free interest rate in the U . S . is 2 % and the current one

Suppose that the current one-year risk-free interest rate in the U.S. is 2% and the current one-year risk-free interest rate in Canada is 6%. You also know that the one-year forward Canadian dollar-euro exchange rate is 0.625(one Canadian dollar equals 0.625 euros) and the one-year forward U.S. dollar-euro exchange rate is 0.8(one U.S. dollar equals 0.8 euros). According to covered interest rate parity, what is the current Canadian dollar/U.S. dollar spot rate (value of one Canadian dollar in U.S. dollars)?
A.
0.9764
B.
1.2311
C.
0.8119
D.
1.0573

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