During this coming year assuming interest rate parity,a.lyou predict that the percentage change in US-Canadian dollar exchange ratewill beb.) you predict the forward exchange rate will be equal toc) you predict an appreciation of thecurrency.d) you predict à depreciation of thecurrency. Assume that you are a Canadian living in Canada, and have $1,000CDN and you are debating about where toinvest it for one year: in Canada or in the USA. Currently, the market interest rate in Canada (icAN) is 2.70% andin the USA, the market interest rate (jus) is 3.75%. The current exchange rate is $1.3107USD= $1CAD. Thespot exchange rate (R) has US currency in the denominator and Canadian currency in the numerator. Theforward exchange rate (F) is the spot exchange rate one year from now.Using above information, complete the below statements, filling in your final, complete answer in thespace/box provided to the right of the statement. Do not show your work.

Forward exchange rate from a spot exchange rate is calculated by this formula:

During this coming year assuming interest rate parity, a.)you predict that the percentage change in US-Canadian dollar exchange rate will be b.) you predict the forward exchange rate will be equal to c) you predict an appreciation of the currency. d) you predict a depreciation of the currency.

During this coming year assuming interest rate parity, a.)you predict that the percentage change in US-Canadian dollar exchange rate will be b.) you predict the forward exchange rate will be equal to c) you predict an appreciation of the currency. d) you predict a depreciation of the currency.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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