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    The decision of currency choice

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    I was asked: suppose that the interest rate in Irish banks is 5% for a one year CD. In the USA, the rate is 2% for a one year CD. If you left your winnings in Ireland, how many Euros would you have in a year? If you had taken your winnings back to the USA, how many dollars would you have?
    Also, when you cashed in your CD in Ireland a year from now, the exchange rate had changed from US$1 to 1.25 Euro, to US$1 to 1.30 Euro. How much would your Irish bank account be worth in US$ at that point? Would I do better by leaving my winnings in Ireland or bringing them home to the USA?

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    Solution Preview

    I was asked, suppose that the interest rate in Irish banks is 5% for a one year CD. In the USA, the rate is 2% for a one year CD. If you left your winnings in Ireland, how many Euros would you have in a year? If you had taken your winnings back to the USA, how many dollars would you have?
    Assume you invest 1 million Euros in one ...

    Solution Summary

    The decision of currency choice is exemplified.

    $2.49

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