Hi, can you please provide me with the solution of question 1 of this international financial management final paper. For part d, please follow the illustration pdf I have attached as my professor requires me to use this illustration method to reach an answer. I would appreciate a prompt reply as it is quite urgent.

1 Chapter 7 End-of-Chapter Question 22: Supplementary Solutions for Illustration Given: S0 = $0.110/MD F60 = $0.108/MD 60-day forward discount of MD = (0.108 - 0.110)/(01.110) = -0.0182 or - 1.82% iUS, 60 = 1% iMD, 60 = 2% Interest rate differential = 1% Case 1 US's perspective: If borrow US$500,000 (hypothetical situation) Diagram and steps of CIA START Day 1 $500,000 S0: $0.110/MD MD4,545,454.55 Borrow in Dollar Money Market x (1 + 1%) = x 1.01 60 days x (1 + 2%) = x 1.02 Lend/Invest in MD Money Market END + Day 60 Repay $505,000.00 in 60 days Receive $500,727.27 in 60 days LOSS = -$4,272.73 F60: $0.108/MD MD4,636,363.64 in 60 days Steps: On Day 1, 1) Borrow $500,000 for 60 days at 1% for 60 days in Dollar Money Market. 2) Exchange the $500,000 at the spot rate of $0.110/MD for MD4,545,454.55 (Spot Contract: Buy MD and sell dollar). 3) Invest MD4,545,454.55 for 60 days at the 2% for 60 days, receiving MD4,636,363.64 in 60 days in MD Money Market. 4) Sell MD proceeds forward today (Day 1) for $ at the 60-day forward rate $0.108/MD: MD4,636,363.64 X $0.108/MD = $500,727.27 (Forward Contract: Sell MD and buy dollar). On Day 60: 5) Repay US$ loan: $500,000 x 1.01 = Repay $505,000.00 6) CIA Loss = ($500,727.27 - $505,000.00) = -$4,272.73 2 Case 2 MD's perspective: If borrow MD4,545,454.55 (hypothetical situation) Diagram and steps of CIA START Day 1 MD4,545,454.55 Borrow in MD Money Market x (1 + 2%) = x 1.02 END + Repay MD4,636,363.64 in 60 days Receive MD4,675,925.93 in 60 days GAIN = S0: $0.110/MD $500,000 60 days x (1 + 1%) = x 1.01 Lend/Invest in US Money Market Day 60 MD39,562.29 F60: $0.108/MD $505,000.00 in 60 days Steps: On Day 1, 1) Borrow MD4,545,454.55 for 60 days at 2% for 60 days in MD Money Market. 2) Exchange the MD4,545,454.55 at the spot rate of $0.110/MD for $500,000 (Spot Contract: Buy dollar and sell MD). 3) Invest $500,000 for 60 days at the 1% for 60 days, receiving $505,000.00 in 60 days in US Money Market. 4) Sell US$ proceeds forward today (Day 1) for MD at the 60-day forward rate $0.108/MD: $505,000.00 / $0.108/MD = MD4,675,925.93 (Forward Contract: Sell dollar and buy MD). On Day 60: 5) Repay MD loan: MD4,545,454.55 x 1.02 = Repay MD4,636,363.64 6) CIA Gain = (MD4,675,925.93 - MD4,636,363.64) = MD39,562.29 ***Please note that the US loss -$4,272.73 in Case 1 is the MD gain +MD39,562.29 in Case 2 using F60 = $0.108/MD.***