Q1You have Cdn $ 500 to invest in either a Cdn Bank or a European Bank for a one year period and you would like to earn the best return possible. Further suppose that today's spot rate of exchange is 1.2400 Cdn dollar per Euro, the EU interest rate is 3% per annum the Cdn interest rate 6% per annum and the expected exchange rate one year from now is 1.2600 Cdn dollar per Euro.

a)If you place the $500 in a Cdn Bank, how much do you earn after a one year period? (5) Marks)

b)If instead you buy Euros at today's spot rate , place them in a EU bank account for a one year period and then convert them to $Cdn how many dollars do you expect to have? (10) Marks)

c)Which is the best investment (3 Marks)