2. Andy Jones speculates with currency options. He currently is anticipating that the EUR will appreciate against the USD. The current spot rate is $1.1790/ and Andy believes it will be at $1.2500 in 90 days. Put and call options with 90 day maturity are available at strike prices of $1.2000/ and a premium of $.003/. a. Should Andy buy a put or a call option? b. If the spot rate is $1.2500/ in 90 days what will be his net profit or loss per ? c. If the spot rate is $1.1500/ in 90 days what will be his net profit or loss per ? 3. Jane Murray is contemplating a carry trade to take advantage of higher interest rates in emerging market countries. She can borrow in the U.S. at 4% pa and invest in Brazil at 12% pa. She expects the exchange rate of Brazilian reals 5.7830/$ to remain about the same over the next year. How much will Jane earn if she borrows $100,000 and invests in Brazil for one year? What risk, if any, is there?