Your grandmother's bank advisor suggested her to invest in bonds and recommendation to buy either Dutch or Canadian government bonds. Suppose that the spot exchange rate between the euro and the Canadian dollar is 0,76 E/C$. You expect that in one year the exchange rate will be 0,74E/C$. Dutch bonds pay 4.5% per year. Canadian bonds pay 6.0% per year. In both cases there is no default risk and the investment is for one year. 

What is your financial advice for your grandmother? 

Should she invest in Canadian or dutch bonds? Be sure to show the calculation that motivate your advice.

Answer rating: 100% (QA)

To determine the financial advice for your grandmother regarding whether she should invest in Canadi... View the full answer