You have $100 Canadian to invest in either of the following two investments (both have the...

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You have $100 Canadian to invest in either of the following two investments (both have the same risk & liquidity): i) A Canadian bond which pays i-5% each period ii) A US bond which pays i=8% each period The current nominal Can-US exchange rate is enom = 0.78. Before the pay-out next period, you expect the US dollar (USD) to appreciate (→ CAD will depreciate) to enom =0.70. If instead you think the USD will depreciate (the CAD will appreciate) by as much and expect enom =0.90. Of these two, which investment would you make? (6 Marks) You have $100 Canadian to invest in either of the following two investments (both have the same risk & liquidity): i) A Canadian bond which pays i-5% each period ii) A US bond which pays i=8% each period The current nominal Can-US exchange rate is enom = 0.78. Before the pay-out next period, you expect the US dollar (USD) to appreciate (→ CAD will depreciate) to enom =0.70. If instead you think the USD will depreciate (the CAD will appreciate) by as much and expect enom =0.90. Of these two, which investment would you make? (6 Marks)

Answer rating: 100% (QA)

3b In case of investment in Canadian bond Worth of investment next period1001... View the full answer