6. (5pts per subquestion) Suppose that there are two countries in the world, Korea and US. Between the two, free financial transactions are allowed. Also, in each local financial markets only two types of financial assets exist-money (Korean Won, USD) and 1-year bond(Korea Vs. US). Currently, the nominal exchange rate is E = (KW)E and the exchange rate next year is expected to be ($) 1 E. The price of 1 year Korean bond is KW Qkor(Cl) and the price of 1 year US bond is $Qus. Each of the bonds will return KW 1 or $1 next year for holders. (a) Calculate the interest rates of the two 1 year bonds in (2). (b) Suppose investors who consider whether to invest in Korean bond or in US bond. What circumstances will make those people indifferent between the Korean bond and the US bond? (c) What will happen if the condition obtained in (b) breaks? 6. (5pts per subquestion) Suppose that there are two countries in the world, Korea and US. Between the two, free financial transactions are allowed. Also, in each local financial markets only two types of financial assets exist-money (Korean Won, USD) and 1-year bond(Korea Vs. US). Currently, the nominal exchange rate is E = (KW)E and the exchange rate next year is expected to be ($) 1 E. The price of 1 year Korean bond is KW Qkor(Cl) and the price of 1 year US bond is $Qus. Each of the bonds will return KW 1 or $1 next year for holders. (a) Calculate the interest rates of the two 1 year bonds in (2). (b) Suppose investors who consider whether to invest in Korean bond or in US bond. What circumstances will make those people indifferent between the Korean bond and the US bond? (c) What will happen if the condition obtained in (b) breaks