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# invest question

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Suppose the CFO of a German corporation with surplus cash flow has 1million Euros to invest. Suppose that interest rates on 1-year CD deposits in US banks are 2%, while rates on 1 year CD deposits denominated in euros in German banks are currently 4.5%. Suppose further that the CFO expects that the (euro/\$) exchange rate will increase from 1euro per \$ to 1.1 euros per \$ during the coming year. Should the CFO invest in CD's denominated in dollars or in euros? Please show all your work/calculations.

https://brainmass.com/economics/exchange-rates/invest-question-123683

#### Solution Preview

I Suppose CFO invest in CD's denominated in Euros

Value of 1 million Euros after 1 year= Principal *(1+interest rate )^ duration

= 1000000*(1+4.5%)^1=
? 1,045,000.00

II ...

#### Solution Summary

Should the CFO invest in CD's denominated in dollars or in euros?

\$2.19