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Interest rates are 5% in the United States and 3.25% in Canada. A carry trader borrows...

Interest rates are 5% in the United States and 3.25% in Canada. A carry trader borrows 7,500,000 Canadian dollars to execute a carry trade. At the start, the exchange rate is CAD 1.1300/USD. After one year, the exchange rate is CAD 1.1150/USD.

A. What is the profit or loss over the year in Canadian dollars?

B. When starting this trade, the carry trader hopes that the Canadian dollar doesn't __________ (appreciate/depreciate)

C. When starting this trade, the carry trader hopes that the US dollar doesn't __________ (appreciate/depreciate)

D. What is the BEEX in one year in terms of CAD/USD. Carry out to 4 decimal places.

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