Question

A U.S. investor purchased a C$100,000 Canadian dollar CD 6 months ago at an APR of 7 percent. The Canadian spot rate was 1.367 C$/U.S.$ when the investment was made. The U.S. dollar cost of the investment was ________ and the total amount of Canadian investment was _________ C$ after 6 months.
A) $136,700; C$107,000
B) $73,153; C$107,000
C) $73,153; C$103,500
D) $136,700; C$103,500

Answer 1

Answer:

option (A) $136,700; C$107,000

Explanation:

Data provided in the question:

Amount purchased = C$100,000

Time = 6 months

APR = 7%

Spot rate = 1.367 C$ / U.S. $

Now,

The value of C$100,000 in U.S. $

= Amount in Canadian dollar × Sport rate

= 100,000 × 1.367

= U.S. $136,700

Value of Canadian investment after 6 months in terms of C$

= Amount in Canadian dollar × (1 + APR)

= 100,000 × (1 + 0.07)

= C$107,000

Hence,

The correct answer is option (A) $136,700; C$107,000