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3. Suppose the U.S. dollar-Euro spot rate is 30 : 1.437 USD per euro. The one year dollar-Euro forward rate is F011 : 1.428 USD

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3. Suppose the U.S. dollar-Euro spot rate is 30 : 1.437 USD per euro. The one year dollar-Euro forward rate is F011 : 1.428 USD per euro. The one year interest rate in the US. is 1.15 percent; in Europe the one year interest rate is 1.25 percent. (5) a. Suppose an investor has 5,000,000 US. dollars to invest then converts it to euros in the spot rate, invests the resulting capital at the European interest rate for one year and converts the proceeds back to USD at the forward rate. Determine returns from this trade. (5) 1). Suppose the investor buys one year US Treasury securities with the 5,000,000 instead. Determine whether this stategj,r or the one in (a) generates greater prot. (5) c. Is the forward rate an equilibrium rate

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