This paper circulates around the core theme of A CFO in New York is trying to decide whether to place funds in a CD in a French bank or a CD in an American bank. The funds won’t be needed by the company for 180 days, but the CFO does not want to incur any risk. The CFO checks the internet and finds together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
A CFO in New York is trying to decide whether to place funds in a CD
in a French bank or a CD in an American bank. The funds won’t be needed
by the company for 180 days, but the CFO does not want to incur any
risk. The CFO checks the internet and finds the following information:
current spot exchange rate is $1.00/euro; 180-day forward rate is
$1.20/euro; the interest rate on 180-day euro-denominated CD at Société
Générale is 6%; and, the interest rate on 180-day U.S.
dollar-denominated CD at Chase is 20%.
She should place the funds in the U.S. bank’s CD since the interest rate is 20% versus 6%.
She should place the funds in the French bank’s CD, but wait until
the CD matures to convert the euros back into dollars at the spot
exchange rate.
She should place the funds in the French bank’s CD, but also at the
same time sell the euro proceeds and principal in the forward market.
She should place the funds in the U.S. stock market since expected returns are always higher.
She should place the funds in the French stock market.
