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1. While abroad, you purchased a French portrait for EUR 10,000, payable in 6 months' time. You have sufficient funds in your domestic (US) bank

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1. While abroad, you purchased a French portrait for EUR 10,000, payable in 6 months' time. You have sufficient funds in your domestic (US) bank to purchase the painting. The current spot rate is 1.2 USD/EUR and the 6 month Forward rate is 1.25 USD/EUR. Currently, annual interest rates are 3% in the US and 6% in France. Assume monthly compounding. Should you: a. Keep the funds in your domestic bank and purchase EUR10,000 Forward? b. Purchase Euros today and invest oversears until the funds are due? Justify your response. LA GAI

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