What should the spot rate of the euro in one year be

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Current one-year interest rates in Europe is 4 percent, while one-year interest rates in the U.S. is 2 percent. You convert $200,000 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 $1.20.

Question a. According to the IFE, what should the spot rate of the euro in one year be?

Question b. If the spot rate of the euro in one year is $1.12, what is your percentage return from your investment?

Question c. If the spot rate of the euro in one year is $1.31, what is your percentage return from your investment?

Question d. What must the spot rate of the euro be in one year for your strategy to be successful?

Reference no: EM132700024

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