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The spot exchange rate for Canadian dollars is $C1.33/$US.
Dollars six-month interest rate one-year interest rate
Canada 2% 2.5%
U.S. 2.5% 2.75%
a. What is the six-month fair forward exchange rate?
b. Is the Canadian dollar a discount or premium currency vs. the United States dollar?
c. What does it cost in U.S. dollars to purchase $C1,000 now?
d. How many Canadian dollars will you receive by entering a six-month forward contract to sell $1,000?
e. What will it cost in Canadian dollars to purchase $US1,000 in six months via a forward contract?
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