The interest rate on a 1-year Canadian security is 8%. The current exchange rate is C$ = US $0.78. The 1-year forward rate is C$ = US $0.76. The return (denominated in U.S. $) that a U.S. investor can earn by investing in the Canadian security is

A) 3.59%.
B) 4.00%.
C) 5.23%.
D) 8.46%.
E) None of the options are correct.

Forward Rate

The agreed-upon price for a financial transaction that will occur at a future date, used in contracts for interest rates, commodities, and currencies.

Canadian Security

A financial instrument issued in Canada, such as stocks, bonds, or options, that represents an investment in the Canadian market.

Denominated

Indicates the currency in which a financial transaction is specified or an investment is made.