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.© BrainMass Inc. brainmass.com October 9, 2019, 7:37 pm ad1c9bdddf
I Suppose CFO invest in CD's denominated in Euros
Value of 1 million Euros after 1 year= Principal *(1+interest rate )^ duration
Should the CFO invest in CD's denominated in dollars or in euros?