A dealer quotes following rates:
Spot exchange rate (SUSD/CAD) = 0.89
Annual risk-free rate (USD) = 5.25%
Annual risk-free rate (CAD) = 3.25%
Suppose the domestic currency is CAD and dealer quote of the 12-month forward rate is
(FUSD/CAD) 0.9172. As compared to the annual return on a domestic only investment, the
annual return on the hedged foreign investment is:
A. 1.06% lower.
B. 1.12% lower.
C. 2.12% higher.
currency exchange
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I think Answer would be B. agar yhi answer hai toh btana fir mei solution share krdunga.