Mammouth Mutual Fund of New York has $5 million to invest in certificates of deposit (CDs) for the next six months (180 days). It can buy either a Philadelphia National Bank (PNB) CD with an annual yield of 10 percent or a Zurich (Switzerland) Bank CD with a yield of 12.5 percent. Assume that the CDs are of comparable default risk. The analysts of the mutual fund are concerned about exchange rate risk.

They were quoted the following exchange rates by the international department of a New York City bank: L012