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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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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.

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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 ...

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