The interest rate in the

The interest rate in the

The interest rate in the U.S. is 7% and the interest rate in France is 10%. Mary has $10,000 which she is planning to invest in France for one year. After the year is up, she will change her Euros back into $. Currently the Euro is trading so that .82 Euro=$11) Assume Mary changes her $ in Euros and invest in Europe for a year and then changes her Euros back into $. Assume also that at the end of the Euro the exchange rate is $1=.71Euro. What has Mary’s effective echange rate been? Would Mary have been better off keeping her money in the U.S. and investing it at 7%2) Now assume that Mary changes her $ into Eurps at the start of the year but that the exchange rate at the end of the yer is $1=.95Euro. What is Mary’s effective intresr rate been? Would Mary have been better keeping her money in the U.S. and investing at 7%?Show work

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