Illustrate what are those key objectives also Illustrate what are the key tools the Fed plans to use to achieve those objectives?
Calculation of exchange rate.
Suppose the CFO of a German corporation with surplus cash flow has 1 million Euros to invest. Suppose which interest rates on 1-yr CD deposits in U.S. banks are 2%, while rates on 1 yr CD deposits denominated in Euros in German banks are currently 4.5%. Suppose further which the CFO expects which the (euro/$) exchange rate will increase from 1 euro per $ to 1.1 Euros per $ during the coming yr. Should the CFO invest in CD's denominated in dollars or in Euros? Explain how your work to substantiate your response as credible.