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**Question 11** A foreign exchange trader has the opportunity to invest in Canadian dollars (CAD) at 6.5% or at 6.25% in U.S. dollars (USD). The current spot rate is USDCAD 0.7203, and you are a Canadian resident. What is the one-year forward rate expressed in USDCAD? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

$\text{forward} = \text{spot} \times \left[ \frac{1 + r_{YYY}}{1 + r_{XXX}} \right] = 0.7203 \times \left[ \frac{1.065}{1.0625} \right] = 0.7220$

(Book 3, Module 35.2, LO 35.k)

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Question 11

A foreign exchange trader has the opportunity to invest in Canadian dollars (CAD) at 6.5% or at 6.25% in U.S. dollars (USD). The current spot rate is USDCAD 0.7203, and you are a Canadian resident. What is the one-year forward rate expressed in USDCAD?

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Financial Risk Manager Part 1

Get started today

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Get started today

Question 11 A foreign exchange trader has the opportunity to invest in Canadian dollars (CAD) at 6.5% or at 6.25% in U.S. dollars (USD). The current spot rate is USDCAD 0.7203, and you are a Canadian resident. What is the one-year forward rate expressed in USDCAD?

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Question 11

A foreign exchange trader has the opportunity to invest in Canadian dollars (CAD) at 6.5% or at 6.25% in U.S. dollars (USD). The current spot rate is USDCAD 0.7203, and you are a Canadian resident. What is the one-year forward rate expressed in USDCAD?