for question one first part options are Rome or Los Angeles...second question options are wrong Los Angeles will rise or fall? for the second part options are New York or Frankfurt and for the other blanks the percentages shown in the picture are the options. thank you!

Attempts Average / 2 4. Arbitrage and spot exchange rates Suppose you trade dollars and euros for a bank that has branches in Los Angeles and Rome. You can electronically transfer the funds between the two branch locations at no cost, and trading commissions are negligible. The current dollar-per-euro exchange rate in Los Angeles is Es/ BUR - 1.5952, while in Rome, it is Es/ EUR - 1.6244. You can make a profit for the bank if you buy euros in and sell them in Assuming other foreign exchange traders face the same exchange rates you do, they will buy dollars in and sell them in . As a result, the dollar-per-euro exchange rate in Rome (Es/ FUR ) will , and the dollar-per-euro exchange rate in Los Angeles (Es/ BUR ) will Grade it Now Save & Continue Continue without saving On June 5, Ginny, an American investor, decided to buy six-month Treasury bills. She found that the per-annum interest rate on six-month Treasury bills is 7.00% in New York and 11.00% in Frankfurt, Germany. Based on this information and assuming that tax costs and other transaction costs are negligible in the two countries, it is in Ginny's best interest to purchase six-month Treasury bills in , because it allows her to earn more for the six months. On June 5, the spot rate for the euro was $0.820, and the selling price of the six-month forward euro was $0.822. At that time, Ginny chose to ignore this difference in exchange rates. In six months, however, the spot rate for the euro fell to $0.818 per euro. When Ginny converted the investment proceeds back into U.S. dollars, her actual return on investment was As a result of this transaction, Ginny realizes that there is great uncertainty about how many dollars she will -2.24% hen the Treasury bills mature. So, she decides to adjust her investment strategy to eliminate this uncertainty. -1.76% What should Ginny's strategy be the next time she considers investing in Treasury bills? 2.24% 1.76% Contract in the forward market to sell the foreign currency in the amount of the proceeds from the Exchange large amounts of domestic currency for foreign currency. Exchange half of the anticipated proceeds of the investment for domestic currency. Had Ginny used the covered interest arbitrage strategy on June 5, her net return on investment (relative to purchasing the U.S. Treasury bills) in German six-month Treasury bills would be . (Note: Assume that the cost of obtaining the cover is zero.)