ECON 385 Suppose the spot foreign exchange rate of the Canadian dollar

ECON 385 Suppose the spot foreign exchange rate of the Canadian dollar

Question # 00345388 Posted By: dr.tony Updated on: 07/25/2016 07:42 AM Due on: 07/25/2016
Subject Economics Topic General Economics Tutorials:
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Suppose the spot foreign exchange rate of the Canadian dollar is $US 1.53, while its 12-month forward rate is $US 1.58. One-year interest rates are 6% in Canada and 10% in the United States. Are there quick profits to be made from foreign currency arbitrage here? If so, show the sequence of purchases and sales, using $Can. 100,000 as your starting point.
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  1. dr.tony
    Tutorial # 00341022 Posted By: dr.tony Posted on: 07/25/2016 07:42 AM
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    The solution of ECON 385 Suppose the spot foreign exchange rate of the Canadian dollar...
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