Suppose you have $10,000 you wish to invest. explain whether you would be better off putting your money in the foreign or domestic alternative presented. (Assume that the level of risk is same for the two alternatives .)
You only want to invest for 5 months. The annual interest rate (for a whole year) on bank deposits on Euros is 6.5% while that on dollar deposits is 5.5%. The current exchange rate is 0.90 Euros per dollar. You expect the exchange rate to be 0.98 Euros per dollar five months from now.