Question: The spot exchange rate S = $ 0 . 7 5 US / CAD. The U . S . interest rate is equal to the

The spot exchange rate S = $0.75 US / CAD. The U.S. interest rate is equal to the interest rate in Canada of 5%. A futures contract on one million CAD with one-year delivery is trading at F = $0.76 US / CAD. Which of the following statements is CORRECT?
a.
An arbitrage opportunity exists and involves borrowing 714,286 USD
b.
No arbitrage opportunity exists
c.
An arbitrage opportunity exists and includes investing in 1,000,000 CAD today
d.
An arbitrage opportunity exists and involves borrowing $952,381 CAD

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