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The interest rate on one-year Canadian government securities is 6 percent and expected inflation rate for the coming year is 2 percent. The U.S. one-year government security instrument interest rate is 4 percent with expected inflation for this coming year of 1 percent. The exchange rate for the US$/Cdn$ as of mid-June 2008 is US $1=Cdn $1.02296 (US$100=Cdn$102.27). What is the spot exchange rate a year from now? What is the forward exchange rate a year from now?

International Economics, Economics

  • Category:- International Economics
  • Reference No.:- M9678263

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