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Calculate the amount of dollars the US investor will receive

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Question - The spot rate of the Canadian dollar is $0.71, the forecasted spot rate year from now is $0.74, and the 1-year forward rate is $073. The annual interest rate on Canadian dollars is 2% and the annual interest rate on US dollars is 3%. A U.S. investor has $1,000,000 to invest. Using covered interest arbitrage.

Calculate the amount of dollars the U.S. investor will receive.

Calculate the percentage return.

Should the investor go ahead with this investment?

Reference no: EM132742044

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