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Assume the current spot rate is Can$.9892 and the 1-year forward rate is Can$.9901. The...

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Finance

Assume the current spot rate is Can$.9892 and the 1-year forward rate is Can$.9901. The nominal risk-free rate in Canada is 3.8 percent while it is 3.9 percent in the U.S. If an investor uses covered interest arbitrage, how much extra profit can he earn over that which he would earn if he invested $100 in the U.S. for one year?

Multiple Choice

$.23

$.19

$.04

$.16

$.02

Answer & Explanation Solved by verified expert
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