A U.S. bank borrowed dollars,converted them to euros,and invested in euro-denominated CDs to take advantage of interest rate differentials. To cover the currency risk the investor should

Question

Quizplus · Accepted Answer

To cover the currency risk associated with the investment in euro-denominated CDs, the investor should sell euros forward. This means entering into a contract to sell euros at a future date at a predetermined rate, thereby locking in the exchange rate and protecting against adverse currency movements.

A US Bank Borrowed Dollars,converted Them to Euros,and Invested in Euro-Denominated