Question
Question1. Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The six-month interest rate is 8
Question1.
Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The six-month interest rate is 8 percent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is 1.01 per dollar and the six-month forward exchange rate is 0.99 per dollar. The treasurer of IBM does not wish to bear any exchange risk.
If he chooses to invest in German, what will be the value of the investment after 6 months in USD? (principal and interest)
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Handbook Of Alternative Assets
Authors: Mark J. P. Anson
2nd Edition
047198020X, 978-0471980209
