# Explain each step used to arrive at the final decision

Suppose you have \$10000 and you thinking about either saving it at a bank in the United States (U.S Show more Suppose you have \$10000 and you thinking about either saving it at a bank in the United States (U.S.) or a bank in Azerbaijan. The spot (or current) exchange rate between the Dollar and the Manat is \$1.05 per Manat but you expect the future exchange rate to be \$1.10 per Manat a year from now. The U.S. interest rate is 10% meaning that a deposit of \$1 in the U.S. yields \$1.10 in a year The Azerbaijan interest rate is 5% meaning that a deposit of 1 Manat in Azerbaijan yields 1.05 Manat in a year. Where will you invest your \$10000 to get the highest return in one year U.S. or Azerbaijan? Use the asset approach three steps to determine the rates of returns and decide whether to invest in the U.S. or Azerbaijan. Explain each step used to arrive at the final decision [4 points each for steps 1 and 2; 2 points for step 3] Show less