EuroMarkets You have landed a foreign exchange analyst intern position at Barclays , tasked to consult the German firm on it's transactions . In our example of the German firm in the Euromarket, . the interest rate the German firm receives from the London bank is 2.7% annually for a 1 year deposit on $1 mil USD the exchange rate is 1USD = 0.84Euro the interest rate from a domestic German bank is 2.85% annually for 1 year deposit denominated in Euros 1. Using the exchange rate given, 1 Euro = how many USD? 2. State the notional $1M USD in Euros 3. Should the German firm, if we have frictionless markets and holding the exchange rate constant, A. deposit $1 million with the London bank and receive interest paid in USD B. exchange the $1 mil USD into Euros and earn the 2.85% from the domestic bank and then exchange back into USD 4. If we consider transaction costs of 0.1% of Euro position each way denominated in USD, what is the total transaction cost. Further find the Net Value for choice B and nominate which strategy the German firm should carry out