Cfo expects that the euro exchange rate will increase from, Ask an Expert

Economics

1) Suppose the CFO of a German corporation with surplus cash flow has 1 million Euros to invest. Suppose that interest rates on 1-year CD deposits in US banks are 2%, while rates on 1year 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?

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9439145

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