4. Suppose the U.S. dollar interest rate is 5% and the euro interest rate is 6%. Assume no transaction costs, fees, or commissions. In all markets, the spot rate for euros is $1.25. You believe in one year's time the spot rate for euros will be $1.30. An investor would like to invest $100,000 for one year and is willing to take on risk for a higher return. A) How would you advise him? B) What if you are incorrect and the euro rate is lower? Calculate the break-even" exchange rate; that is, an investment that returns the same as investing $ 100.000 at 5%. 5. Suppose interest rates in the United States are 5.5%, while they are 3% in the euro area. Currently the dollar-euro exchange rate is at $2.50 per euro. If UIP holds, what do you expect the exchange rate to be in the future? Round to three decimals. 4. Suppose the U.S. dollar interest rate is 5% and the euro interest rate is 6%. Assume no transaction costs, fees, or commissions. In all markets, the spot rate for euros is $1.25. You believe in one year's time the spot rate for euros will be $1.30. An investor would like to invest $100,000 for one year and is willing to take on risk for a higher return. A) How would you advise him? B) What if you are incorrect and the euro rate is lower? Calculate the break-even" exchange rate; that is, an investment that returns the same as investing $ 100.000 at 5%. 5. Suppose interest rates in the United States are 5.5%, while they are 3% in the euro area. Currently the dollar-euro exchange rate is at $2.50 per euro. If UIP holds, what do you expect the exchange rate to be in the future? Round to three decimals