Answer : yield of ___6.7%_______ on a 1-year Canadian bill will make investor indifferent between investing in the U. S. bill and the Canadian bill.

Working notes for the above answer is as under

We have provided with the information that,

The present exchange rate is C$ = U.S. $0.78.

The 1-year future rate is C$ = U.S. $0.76

The yield on a 1-year U.S. bill is 4%.

1.04 = [($0.76/$0.78)(1 + r)] − 1;

= 6.7%.

So we can say that yield of ___6.7%_______ on a 1-year Canadian bill will make investor indifferent between investing in the U. S. bill and the Canadian bill.