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Please provide a THOROUGH explanation with steps. Given the information: Interest rate in US (Rh): Interest rate in Euro zone (Rh): Line of credit in
Please provide a THOROUGH explanation with steps.
Given the information: Interest rate in US (Rh): Interest rate in Euro zone (Rh): Line of credit in US: Line of credit in in Euro zone: The spot rate of EUR, now (SRO): 3.5% 7.5% USD 10,000,000 EUR 8,000,000 $1.25 Suppose your forecast tells you that the spot rate of EUR one year later (SR1) will be $1.20. What is your uncovered rate of return from US (Ruh)? 3.20% Suppose your forecast tells you that the spot rate of EUR one year later (SR1) will be $1.20. What is your uncovered rate of return from Euro zone (Ruf)? 7.81%Step by Step Solution
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