Purchase Solution

Nominal Rate Comparison in Canada and U.S.

Not what you're looking for?

Ask Custom Question

Suppose the nominal interest rate in the US is 7.5% and US inflation is 3.5%. Also the Canadian dollar spot rate is 0.8574 and the Japanese yen spot rate is 0.00688. Finally, the 90-day forward rate for the Canadian dollar is 0.8493 and for the Japanese yen is 0.00700.

Suppose the nominal 90 day US interest rate is 1.875%. Then Canadians nominal 90-day interest rate is approximately:
a. 1.7%
b. 5.9%
c. 0.87%
d. 2.8%

Purchase this Solution

Solution Summary

Four step process shown for you and computations done by hand.

Solution Preview

The nominal interest rate should be such that there is no arbitrage opportunity.
Suppose we borrow 1 CAD

Step 1: convert it into US$ and receive US$0.8574. ...

Purchase this Solution


Free BrainMass Quizzes
Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Introduction to Finance

This quiz test introductory finance topics.