If they are investing, say, 1 million in a euro deposit at 3.42% per annum versus investing that identical amount in a yen deposit at 0.6948% per annum, they can cover for foreign exchange risk by employing a forward contract, given today's spot rate from Table 2 of 123.89 JPY/USD, and a 1-year forward rate of 124.28 JPY/USD.

Calculate what the returns would be in both of these cases.

Answer rating: 100% (QA)

To calculate the returns in both cases we need to consider the interest earned from the deposits and ... View the full answer