What should the spot rate of the euro in one year

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Reference no: EM131994062

Current one-year interest rates in Europe are 2 percent, while one-year interest rates in the U.S. are 1.6 percent. You convert $100,000 to euros and invests them in France. One year later, you convert the euros back to dollars. The current spot rate of the euro is $1.28.

1- According to the IFE, what should the spot rate of the euro in one year be?

2- If the spot rate of the euro in one year is $1.20, what is your percentage return from your investment?

3- If the spot rate of the euro in one year is $1.35, what is your percentage return from your investment?

4- What must the spot rate of the euro be in one year for your strategy to be successful?

Reference no: EM131994062

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