pm.3 Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The six-month interest rate is 8percent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is €1.11 per dollar andthe six-month forward exchange rate is €1.09 per dollar. The treasurer of IBM does not wish to bear any exchange risk. Where shouldthey invest to maximize the return?Required:a. The maturity value in six months if the extra cash reserve is invested in the U.S.:Note: Do not round intermediate calculations.b. The maturity value in six months if the extra cash reserve is invested in Germany:Note: Do not round intermediate calculations. Round off the final answer to nearest whole dollar.c. Where should they invest to maximize the return?a. Maturity valueb. Maturity valuec. Better investment

To determine where the treasurer of IBM should invest the extra cash reserve to maximize the return…

ercent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is €1.11 per he six-month forward exchange rate is €1.09 per dollar. The treasurer of IBM does not wish to bear any exchange risk. Whe hey invest to maximize the return? equired: . The maturity value in six months if the extra cash reserve is invested in the U.S.: Note: Do not round intermediate calculations. . The maturity value in six months if the extra cash reserve is invested in Germany: Note: Do not round intermediate calculations. Round off the final answer to nearest whole dollar.

ercent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is €1.11 per he six-month forward exchange rate is €1.09 per dollar. The treasurer of IBM does not wish to bear any exchange risk. Whe hey invest to maximize the return? equired: . The maturity value in six months if the extra cash reserve is invested in the U.S.: Note: Do not round intermediate calculations. . The maturity value in six months if the extra cash reserve is invested in Germany: Note: Do not round intermediate calculations. Round off the final answer to nearest whole dollar.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 46QA

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