The spot rate of foreign exchange between Canada and the United Kingdom is CAD$1.75/£. If the interest rate in Canada is 11 per cent and it is 6 per cent in the United Kingdom, what would you expect the one-year forward rate to be if no immediate arbitrage opportunities existed?

The spot rate of foreign exchange between Canada and the United Kingdom is CAD$1.75/£. If the interest rate in Canada is 11 per cent and it is 6 per cent in the United Kingdom, what would you expect the one-year forward rate to be if no immediate arbitrage opportunities existed?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 4ST

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