If you want to keep your profits in how much of the, Financial Management

If you want to keep your profits in how much of the

A currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one year. The one-year interest rate in the U.S. is i$ = 2% and in the euro, zone the one-year interest rate is i€ = 6%. The spot exchange rate is $1.25 = €1.00 and the one-year forward exchange rate is $1.20 = €1.00.

1) What is the amount of the investing currency obtained through borrowing and conversion?

2) Identify in words 4 actions you would take today

3) If you want to keep your profits in $, how much of the investing currency is converted to the borrowing currency?

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