suppose the quarterly (90-day) interest rate in the us is 2.5% and it is 4% in canada. if the $/cd spot exchange rate is $0.80/cd and the 90-day forward exchange rate between us and canadian dollars is $0.79/cd, does the interest rate parity (irp) hold? why or why not? if it does not hold, what is the direction of the capital flow?
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