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The current euro to dollar exchange rate is $1.15 per euro. The 90 day forward exchange rate is also $1.15 per euro. Assume interest rates

The current euro to dollar exchange rate is $1.15 per euro. The 90 day forward exchange rate is also $1.15 per euro. Assume interest rates in Germany for 90 days are currently set at 0.4% as an annual interest rate. Assume interest rates for 90 days in the U.S. of 1.6% as an annual interest rate. (Hint: Take the interest rate times 90/360, or 0.25, to find the 90-day interest rate.) Now, assume that Audi AG is holding 100,000,000 euros that it does not plan to touch for 90 days. If Audi uses that money to invest in the U.S. using covered interest arbitrage, how much additional money from interest will Audi make over what it would have made in Germany?

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