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Currently the spot exchange rate is euro101 per dollar and

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.

Where should he or she invest to maximize the return?

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Finance Basics: Currently the spot exchange rate is euro101 per dollar and

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Finance Basics: Currently the spot exchange rate is euro101 per dollar and

Reference No:- TGS01491565

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