Question
Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The interest rate is 11 percent per
Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The interest rate is 11 percent per annum in the United States and 10 percent per annum in Germany. Currently, the spot exchange rate is 1.14 per dollar and the six-month forward exchange rate is 1.12 per dollar. The treasurer of IBM does not wish to bear any exchange risk. Where should he or she invest to maximize the return?
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Get StartedRecommended Textbook for
International Economics
Authors: Dennis Appleyard, Alfred Field
8th Edition
978-0078021671, 0078021677
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