$2.$ Look at the annual report of Nike. Of the three fx exposures, discussed in class, which do you think impacts Nike the most and why? Explain in details the amount of the said exposure and how does $($if at all$)$ Nike hedge it$?$

Spot Forward Forecast

EURUSD $1\mathrm{.}081\mathrm{.}091\mathrm{.}1$

USDJPY $153146143$

USDCAD $1\mathrm{.}371\mathrm{.}361\mathrm{.}35$

USDMXN $16\mathrm{.}9917\mathrm{.}6317\mathrm{.}4$

USDCNY $7\mathrm{.}247\mathrm{.}097\mathrm{.}2$

$1-$year yield

EUR $3\mathrm{.}37\%$

Japan $0\mathrm{.}10\%$

Canada $4\mathrm{.}68\%$

Mexico $11\mathrm{.}31\%$

China $1\mathrm{.}69\%$

USA $5\mathrm{.}13\%$

$3.$ Use the data above to verify that covered interest arbitrage is not profitable. Please note that the forward rates and forecasts are for the year end and all the data is as of May $3$rd$.$ If you were to run a carry trade instead with the belief that the forecasts are accurate which pair would you chose and how much would your profitability be if you could borrow the equivalent of $1$ million USD?

$4.$ Based on the interest rates given above and if IFE holds true. What will be the change in Japan $($hint: use US for Home$)?$ What is the new exchange rate?