Investment in Different Currencies: Should the CFO invest in CDs denominated in dollars or in euros? Suppose the CFO of a German corporation with surplus cash flow has 1 million Euros to invest...

Investment in Different Currencies: Should the CFO invest in

CDs denominated in dollars or in euros?

Suppose the CFO of a German corporation with surplus cash

flow has 1 million Euros to invest Suppose that interest rates on 1-year CD

deposits in US banks are 2%, while rates on 1 year CD deposits denominated in

euros in German banks are currently 45% Suppose further that the CFO expects

that the (euro/$) exchange rate will increase from 1 euro per $ to 11 euros

per $ during the coming year Should the CFO invest in CDs denominated in

dollars or in euros? Show your work