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The euro exchange rate is $1.25/euro. The continuously compounded dollar interest rate it 5% and the continuously compounded euro in- terest rate is 4%. Suppose

The euro exchange rate is $1.25/euro. The continuously compounded dollar interest rate it 5% and the continuously compounded euro in- terest rate is 4%. Suppose that you borrow euros and lend dollars for 1 year. At what exchange rate will you break even on this position?

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