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    Assessing the International Aspects of Financial Management

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    Please help with the following problem.

    The spot rate between Canada and the U.S. is C$1.2381 - $1, while the 1-year forward rate is C$1.2379 = $1. The risk-free rate in Canada is 2.8 percent. The risk-free rate in the U.S. is 3.6 percent. How much profit can you earn on a loan of $10,000 by utilizing covered interest arbitrage?

    a) -$81.42
    b) -$78.34
    c) -$53.60
    d) $34.91
    e) $65.07

    Please show how to find the solution.

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    Question

    International Aspects of Financial Management
    The spot rate between Canada and the U.S. is C$1.2381 - $1, while the 1-year forward rate is C$1.2379 = $1. The risk-free rate in Canada is 2.8 percent. The risk-free rate in the U.S. is 3.6 percent. How much profit can you earn on a loan of $10,000 by utilizing covered interest ...

    Solution Summary

    This posting helps with assessing the international aspects of financial management. It discusses the price between Canada and the U.S. The solution is given in an Excel file.

    $2.49

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