1. Carry Trade a. What is the carry trade? Consider the following 1 -month British pound (E) and Eura {} interest rates (not annualized) and exchange rates, quoted as British pounds per Euro: At cach date, you borrow 2,500,000 Euros, exchange the Euros for British pounds, and invest those British pounds for one month at the 1-month interest tate above. b. For each date, it the exchange rate does not change over the following 1-month period, what is your net income in Euros? b. Consider the exchange rate at the end of each one month period above: DateJan.2,2008Oct.1,2008Aug.1,2014ExchangeRate0.74990.80220.7953 For each date, did the Euro appreciate or depreclate relative to the British pound over the following one month period? For each date, calculate the net income in Euros on the one month carry trade- c. Based on your answers above, if the funding currency appreciates, will the carry trade be profitable? 1. Carry Trade a. What is the carry trade? Consider the following 1 -month British pound (E) and Eura {} interest rates (not annualized) and exchange rates, quoted as British pounds per Euro: At cach date, you borrow 2,500,000 Euros, exchange the Euros for British pounds, and invest those British pounds for one month at the 1-month interest tate above. b. For each date, it the exchange rate does not change over the following 1-month period, what is your net income in Euros? b. Consider the exchange rate at the end of each one month period above: DateJan.2,2008Oct.1,2008Aug.1,2014ExchangeRate0.74990.80220.7953 For each date, did the Euro appreciate or depreclate relative to the British pound over the following one month period? For each date, calculate the net income in Euros on the one month carry trade- c. Based on your answers above, if the funding currency appreciates, will the carry trade be profitable