question archive You are in charge of managing $10 million for one year

You are in charge of managing $10 million for one year

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You are in charge of managing $10 million for one year. You are allowed to Invest only in the US or German government bonds, both of which are considered risk free. The money is needed exactly one year from now in dollars, and you are not allowed to take any risks with It. The interest rates on the dollar and the German bonds are, respectively, I$ - 0.02 and ie - 0.05. The spot exchange rate is e = 0.90</$ and the forward rate is ef = 0.945c/$. What Is the highest return you can expected on the $10 million? (Answer the number of dollars with no dollar sign or separators.) Assume that any contract you make must be backed by the assets that you already have.

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