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Consider A Hypothetical Situation With The Following Information Spot Rate Of Canadian Dollar

Question

Consider a hypothetical situation with the following information:

Spot Rate of Canadian dollar:

$0.78

180-day forward rate of Canadian dollar: $0.85

180-day Canadian interest rate: 4%

180-day US interest rate: 4.5%

Given the information above, compute the 180-day net yield to the investor who carries out a covered interest arbitrage.

Finance