What is the future value of your investment in euros

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1. For this and the next 2. Suppose the following facts apply: Spot currency rate ($/ = $1.28); Forward exchange rate for 1 year delivery = $1.25; US 1-year interest rate: rUS = 4%; Euro 1-year interest rate: rE = 7%; Amount to invest = $5,000,000. You reside in the United States but wish to invest your $5 million in the 1-year European bonds. What is the future value of your investment in euros?

4,179,687.50

3,906,250.00

4,906,250.10

None of the above

2.  In order to execute a covered interest arbitrage, you sell 1-year euro futures. What is your rate of return on your overseas investments - after converting your investment proceeds back to USD?

4.045%

4.492%

7.125%

None of the above

Reference no: EM131178254

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