Carry Trade:

Suppose that you are in January 2018 observing that US deposit rates are 1.5%, Argentinian deposit rates are 21.50% and the E_{$/ARS_2018}=0.056. One year later, E_{$/ARS_2019}=0.028. Would a carry trade on the Argentinian peso starting in January 2018 be profitable if kept until January 2019? Explain.

Suppose that you are in January 2018 observing that US deposit rates are 1.5%, Argentinian deposit rates are 21.50% and the Es/ARS 2018 = 0.056. One year later, ES/ARS 2019 = 0.028. Would a carry trade on the Argentinian peso starting in January 2018 be profitable if kept until January 2019? Explain