Homework Answers
| Given,the current exchange rate of Euro to US Dollar : 1 Euro will fetch 1.25 US $ |
| So, an amount of 1000 Euros is equal to 1000*1.25= 1250 US $ |
| Interest amt. on Euro bond on the amount invested=1000*3.35%= 33.5 euros |
| Interest on US bond on the amount invested=1250*2.25%= 28.13 which is (1/1.25*28.13)= 22.50 euros |
| 33.5>22.5 |
| So, the German firm should invest in Euro bonds only. |
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