1. (5 Points) You are given the following information: Nominal one year interest rate Spot rate U.S. 5.30% India Colombia 7.75% 13% $0.012 $0.00026 Interest rate parity exists between the U.S. and India as well as the U.S. and Colombia. The international Fisher effect exists between the U.S. and India as well as the U.S. and Colombia. The official currency of India is the Indian rupee and the official currency of Colombia is the Colombia peso. Noah (based in the U.S.) invests in a one-year CD (certificate of deposit) in India and sells Indian rupee one year forward to cover his position. Mia (based in India) invests in a one-year CD in Colombia and does not cover her position. What are the returns on funds invested for Noah and Mia respectively? What conclusions/comments related to IRP and/or IFE can you make from Noah's return and Mia's return respectively? (Hint: You can get the exchange rate between the Indian rupee and the Colombia peso from their respective rate to USD.) ANS: Please clearly label your return calculations, i.e., the investment return for Noah and Mia respectively.