(a) American has an extra cash reserve of $5,000,000 to invest for six months. The six- month interest rate is 9 percent per annum in the United States and 12 percent per annum in Netherland. Currently, the spot exchange rate is 1.35 per dollar and the six-month forward exchange rate is 0.99 per dollar. The treasurer does not wish to bear any exchange risk. Where should he invest to maximize the return? (15 marks) (b) How vertical integration and labour imperfection influence foreign direct investment? (10 marks)