Question
An investor is provided with the following data investment data for the two countries: Spot exchange rate (Euros/USD) 0.7864 Interest rate in the US 5%
An investor is provided with the following data investment data for the two countries:
Spot exchange rate (Euros/USD) 0.7864
Interest rate in the US 5%
Interest rate in Germany 3%
The forward rate, as calculated was 0.771421.
If an investor were to invest $ 1,000 in a 5% interest-bearing note in the US for a year and exchange it for Euros, how much is this investment worth in Euros?
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett, Otgo Erhemjamts
10th Edition
1260013820, 978-1260013825
