German firm receives the following interest rate from London Bank: 3.85% annually for 1 year deposit on 1 million USD Exchange rate: 1 USD = 0.89 EUR Interest rate from a domestic German bank: 3.45%. annually for 1 year deposit denominated in Euros A) Deposit 1 million USD to London bank and receive USD for interest paid B) Exchange the 1 million USD into Euros and earn 2.45% from the domestic bank and then exchange it back to USD 890,000 EUR 1.12 USD 1. 1,000,000 USD = ? EUR 2. 1 EUR = ? USD 3. USD interest 1 yr 1,000,000 USD EUR interest USD 4.transaction costs to exchange USD to EUR and back is 0.1% of Euro position each way denominated in USD transaction costs = USD Net Value USD alt Net Value USD German firm receives the following interest rate from London Bank: 3.85% annually for 1 year deposit on 1 million USD Exchange rate: 1 USD = 0.89 EUR Interest rate from a domestic German bank: 3.45%. annually for 1 year deposit denominated in Euros A) Deposit 1 million USD to London bank and receive USD for interest paid B) Exchange the 1 million USD into Euros and earn 2.45% from the domestic bank and then exchange it back to USD 890,000 EUR 1.12 USD 1. 1,000,000 USD = ? EUR 2. 1 EUR = ? USD 3. USD interest 1 yr 1,000,000 USD EUR interest USD 4.transaction costs to exchange USD to EUR and back is 0.1% of Euro position each way denominated in USD transaction costs = USD Net Value USD alt Net Value USD