Problem
Assigned Problem 2 Assume that the U.S. is the home country. Suppose 1 U.S. dollar equals 1.60 Canadian dollars in the spot market. Six-month Canadian securities have an annualized return of 6% (and thus a 6- month periodic return of 3%). Six-month U.S. securities have an annualized return of 6.5% and a 6-month periodic return of 3.25%. If interest rate parity holds, what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward market?