Suppose Ford has $100,000,000 to invest over the next six months. The interest rate is 10% in the USA and 9% in Germany; the Spot exchange rate is Euro 1.18 per dollar, and the six-month forward exchange rate is Euro 1.16 per dollar. Ford does not wish to bear any exchange risk. Where should it invest to maximize the return?

Answer rating: 100% (QA)

To maximize returns while avoiding exchange rate risk Ford can use a strategy called covered interes... View the full answer