The present exchange rate is C$ = U.S. $1.05. The one year future rate is C$= U.S.

$1.04. The yield on a 1-year U.S. bill is 3%. A yield of ________ on a 1-year ________

Canadian bill will make investor indifferent between investing in the U.S. bill and the

Canadian bill.

A) .24%

B) .96%

C) 2.02%

D) 4.00%

E) none of these