Question
Bank Three recently purchased $10 million worth of euro-denominated one-year CDs that pay 12 percent interest annually. The current spot rate of US dollars for
Bank Three recently purchased $10 million worth of euro-denominated one-year CDs that pay 12 percent interest annually. The current spot rate of US dollars for euros is 1.35 $/.
What will be the return on the one-year CD if the dollar appreciates relative to the euro such that the spot rate of US dollars for euros at the end of the year is 1.24 $/. Show your workings. [6 marks]
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Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes
11th International Edition
1259094901, 9781259094903
