The following exchange rates exist today:

Spot exchange rates:Canadian $0.96/U.S. dollar

U.S. $1.05/British pound

U.S. $1.10/euro

Forward exchange rates (120 day):Canadian $0.968/U.S. dollar

U.S. $1.04/British pound

The following (annualized) interest rates on 120-day government bonds also exist today:

Canadian government, Canadian dollar-denominated:4.0%

U.S. government, U.S. dollar-denominated:1.5%

British government, British pound-denominated:4.4%

German government, euro-denominated: 0.4%

A German investor thinks about her income and wealth in euros, and she is comfortable with the amount of her current exposure to exchange-rate risk.She currently has some investments in both 120-day U.S. government dollar-denominated bonds and 120-day German government euro-denominated bonds.She is willing to adjust her investments as long as any changes leave her exposure to exchange-rate risk unchanged.She knows that one of the following two (120-day) forward exchange rates will exist today:

Either U.S. $1.107/euro or U.S. $1.117/euro.

Which of the following is/are possible:

The investor prefers that the forward rate is U.S. $1.107/euro

The investor prefers that the forward rate is U.S. $1.117/euro

The investor is essentially indifferent between these two forward exchange rates

How would you go about setting this up?