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Find where should invest to maximize the return

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Problem 1: Suppose that you have an extra cash reserve of $100,000 to invest for 1 year. The interest rate is 4% per annum in the United States and 3% per annum in France. Currently, the spot exchange rate is €0,80 per dollar and the one-year forward exchange rate is €0.75 per dollar. If you do not want to bear any exchange risk, where should you invest to maximize the return?

Reference no: EM132667466

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