INTERNAL FINANCE

General Electric (GE) is a US firm that executes carry trade. The company borrows euros and invests in British pounds. GE can invest $100,000 of its own funds and borrow an additional 600,000 euros at .5%. Assume the following:

GE can earn 1% on funds invested in Britain. The spot rates are: $1.20/ and $1.5/ at the start and end of the investment period. Using the table below, compute and explain how GE could capitalize on the interest rate differential.

Steps:		Exchange rate	Interest Rate		Computations
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