1. Consider the following data collected on February 9, 2004. The interest
rate given is for a one-year money market deposit. The spot exchange rate
is the rate for February 9. The expected exchange rate is the one-year
forward rate.

A) Use both RoR formulae (one from section
10-4 the other from section
10-5: Step 5) to calculate the expected rate of return on the
Canadian money market deposit and show that both formulae generate
the same answer. (Express each answer as a percentage.)

B) What part of the rate of return arises only due to the interest
earned on the deposit? (Express the answer as a percentage.)

C) What part of the rate of return arises from the percentage change
in the value of the principal due to the change in the exchange rate?
(Express the answer as a percentage.)

D) What component of the rate of return arises from the percentage
change in the value of the interest payments due to the change in
the exchange rate? (Again, express the answer as a percentage.)