Concept of the covered interest rate parity imply in case

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Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest. The interest rate is 8 percent per annum in the United States and 7 percent per annum in Germany. Currently, the spot exchange rate is $1.20 per Euro and the one year forward exchange rate is $1.18 per dollar. The treasurer of IBM does not wish to bear any exchange risk. Where should he/she invest to maximize the return?. What current spot exchange rate would the concept of the covered interest rate parity imply in this case?

Reference no: EM132014521

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