The spot exchange rate for the Canadian dollar is Can $1.14 and the six-month forward rate is Can $1.17. Calculate whether a U.S. dollar or a Canadian dollar is worth more.
What calculation? A canadian dollar is worth 1/1.14 US cents. If a US dollar will buy a quart of milk, the canadian dollar byes less than a quart.
To determine whether a U.S. dollar (USD) or a Canadian dollar (CAD) is worth more, we can compare the exchange rates.
The spot exchange rate refers to the current rate at which one currency can be exchanged for another. In this case, the spot exchange rate is Can $1.14, which means that 1 U.S. dollar can be exchanged for Can $1.14.
The forward exchange rate refers to the rate at which currencies can be exchanged at a future date, typically several months from the present. In this case, the six-month forward rate is Can $1.17, which means that 1 U.S. dollar can be exchanged for Can $1.17 in six months.
To decide whether the USD or CAD is worth more, we compare the two exchange rates. If the forward exchange rate (Can $1.17) is greater than the spot exchange rate (Can $1.14), it means that the CAD is appreciating against the USD, and therefore, the CAD is worth more. If the forward exchange rate is less than the spot exchange rate, it means that the CAD is depreciating against the USD, and therefore, the USD is worth more.
In this case, since Can $1.17 is greater than Can $1.14, the CAD is appreciating against the USD. Therefore, the Canadian dollar is worth more in this scenario.