Suppose the following data:
6 month interest rate in Canada = 2.93833%
6 month interest rate in US = 2.46375%
spot exchange rate = 1.11976
a) According to covered interest rate parity, what must be the 6-month forward rate?
b) If the actual forward rate is 1.1575 then what actions will bring the forward and spot rates back into line with interest rate parity?