David estimated a six-month forward rate of C$1.01 per US$. The six-month US$ interest rate is currently 4%. If David's estimate is based on covered interest rate parity, what was the observed current six-month Canadian interest rate if the spot rate is 1.02? a) 5.03% b) 2.03% c) 2.98% d) 2.05%

David estimated a six-month forward rate of C$1.01 per US$. The six-month US$ interest rate is currently 4%. If David's estimate is based on covered interest rate parity, what was the observed current six-month Canadian interest rate if the spot rate is 1.02? a) 5.03% b) 2.03% c) 2.98% d) 2.05%

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 4ST

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