What is the us dollar-canadian dollar exchange rate in the


Suppose 1 U.S. dollar equals 1.60 Canadian dollars in the spot market. 6-month Canadian securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month U.S. securities have an annualized return of 6.5% (and thus 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 6-month forward market?

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