Interest rates and exchange rates

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Reference no: EM131178032

Suppose you find the following rates: Interest rates: U.S.: 3 percent and EU: 4 percent. Exchange rates: Spot; $1.0650; One year forward: $1.0525.

(a) What will be the outcome of $100 invested in the U.S. market?

(b) What will be the outcome of investing $100 in the EU market with a forward Cover (sale)?

Reference no: EM131178032

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