Felipe Lemos is a currency strategist with the Miami-based hedge fund Kawa. With the annual interest rate at 8.5 percent for real-denominated deposits with AAA-rated Brazilian banks, Felipe is considering taking $10 million from Kawa money market mutual funds currently yielding a paltry annual 0.75 percent to invest in real (BRL). The current spot exchange rate between the U.S. and Brazilian currency currently stands at BRL 1.82 = $1. a. Under what exchange rate scenario would the carry trade be profitable? b. What are the risks involved in the carry trade? How can they be hedged