I have completed some of the worksheet from the attached documents and I need your help.

Please answer the following step by step,

statistics are attached (For Korea, and the US 2001-2006)

Use geometric instead of arithmetic averages.

Use exact instead of the approximate method

Q1.During the assigned time period:

US dollarappreciated / depreciated(choose one) in real terms against the currency of Korea.

Q2.During the assigned period, what was the averageuncovered rate of returnfrom theUS

viewpoint for Korea?

Q3.During the assigned period, what was the averageuncovered rate of returnfrom Korea's viewpoint?

Q4.Based on your answers to questions 2 and 3, given perfect hindsight about interest rates and exchange rate changes during the assigned time period you should have:

Invested/ borrowed(choose one) in the US andinvested / borrowed(choose one) in Korea.

Q5.Assume that you could both borrow and invest at the average interest rates prevailing in Korea and in the US during the assigned time period. Also assume that you have a line of credit for one million dollars in the US or an equivalent amount in K. Given perfect hindsight about interest rates and exchange rate changes, please calculate yourtotal profit in dollars using uncovered interest arbitrageduring the assigned time period if you followed the strategy chosen inQ4.

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Consumer Price Index Percent change from year ago 1995 1956 1907 2000 2001 2002 2003 200 2005 2003 Australia 0.2 0.9 1.5 4.5 4.4 3.0 2.8 2.7 3.6 2.3 Austria 1.2 1.3 2.1 1.7 2.2 Canada 2.1 1.0 2.8 2.2 2.0 2.1 Chile B.2 B.1 5.1 3.3 3.8 2.5 1.1 3.0 China 17.1 8.3 0.3 0.5 -0.8 3.9 1.8 Denmark 2.1 2.1 2.2 1.8 2.5 2.9 2.4 2.4 1.8 1.9 Euro Area 2.6 1.2 1.1 2.2 2.4 2.3 2.2 Finland 0.4 1.3 2.9 2.0 0.8 France 0.8 Germany 1.5 0.6 0.8 1.8 Greece 7.9 5.4 4.5 21 2.9 3.7 3.9 3.5 3.3 3.0 ndonesia 9.4 8.0 6.2 58.4 3.7 11.5 11.9 6.6 6.2 10.5 13.1 Ireland 2.2 2.5 2.2 2.7 Israel 10.0 11.3 9.0 5.5 5.2 5.7 2.1 0.5 Italy 4.0 1.9 1.7 2.6 2.2 2.6 2.2 2.2 2.0 Japan 0.1 0.1 1.8 0.7 -0.3 -0.7 .0.8 0.9 -0.0 -0.3 0.2 D. 1 Korea 7.5 3.5 2.8 2.5 Malaysia 3.5 2.7 1.5 1.8 1.0 3.0 Mexico 35.0 34.4 20.6 16.6 9.5 0.4 4.5 4.7 Netherlands 1.4 1.5 1.9 1.8 2.0 2.3 5.1 3.9 2.2 1.7 New Zealand 2.3 1.3 26 2 6 1.8 2.3 3.0 Norway 1.2 2.3 2.3 hili 9.0 5.9 6.7 -0.2 3.0 3.6 7.6 6.3 2.8 Singapore 1.7 2.0 0.0 1.0 0.5 1.6 0.5 1.0 2.1 South Africa 6.9 5.2 5.7 3.4 Spain 4.8 1.8 2.2 3.5 2.4 3.4 sweden 0.5 0.7 -0.3 0.5 0.9 2.4 2.2 1.9 0.5 1.4 2.2 Switzerland 1.8 0.B 0.5 0.0 D.8 0.8 0.6 1.1 Thailand 5.8 5.8 5.8 8.1 0.3 1.6 0.6 1.8 4.6 4.8 Turkey 59.1 80.4 84.6 64.1 21.8 B.2 9.6 United Kingdom 2.7 2.5 1.6 1.3 1.3 2.1 2.3 2.3 United States 2.8 2.9 2.3 22 2.8 2.7 3.4 3.2 2.9 Venezuela BO.0 99.8 50.0 35.8 23.6 162 12.5 22 4 31.1 21.7 180 13.8Geometric and Arithmetic Means of Rates and Percentages If the rates for years 1 2 3 . are R Ry Ry But then you can calculate the arithmetic and geometric mean or averages of these rates over the N years , as follows Arithmetic Mean ( Rit R 2 + Rat + RUN Geometric Mean ( 1 + Rat ( 1 + R ) * ( 1 + R ) * * * 1 R ) JUN 1 Note that in the geometric mean formula , the percentages are written in decimals For example , We use O 10 instead of 109 and - 102 instead of - 206 Also in the end we take the Nith root of the product , where N is the number of years in the averaging period It is important to know that the geometric mean is a more accurate measure than the arithmetic mean . Always try to use the geometric mean method when calculating averages of rate of returns of percentages Let us assume the following rates of return for the five year period ( 2090-2004 The 519 2003 2005 Rates of return 4. 7506 059 6 239 6 796 Our estimate of the average rate of return over the 2000 04 period based on : Arithmetic Mean = (0.0475- 0.08 + 0.005 + 0.23 + 0.07 15 0.0545 - 5.450 6 Geometric Mean = ( ( 1+GOALS ( 1 - 0.08 ) + ( 1 + 0 005 ) * ( 1 + 0 23 ) = ( 1 + 0.OD ( 1 02746 672 ) 13 - 1 0.04973 = 497396 4 973 Do is a more accurate measure of the average return over the 2000 -04 period than J.4596Exchange Rates Percent appreciation (+) or depreciation (-) of the U.S. dollar against the local currency 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2008 2007 Australia -1.3 -5.3 5.3 -2.4 11.0 -11.5 1.2 -10.1 Canada 0.5 -0.7 1.0 7.1 -0.0 4.3 1.4 -10.8 -7.1 -8.9 -6.4 Chile -5.6 3.9 9.8 10.5 6.1 17.7 8.5 0.4 -8.2 -5.3 China -3. 1 -0.4 -0.2 -0.2 -0.3 0.0 -0.0 0.0 0.0 -0.0 -1.0 -2.7 -4.6 Denmark -11.8 13.9 2.9 -5.3 -16.6 -9.0 0.1 -0.9 -8.4 Euro Area -8.7 2.3 13.9 4.4 15.5 3.1 -5.3 -16.5 -9.0 -0.1 -0.9 -8.4 Indonesia 4.2 24.2 244.2 -21.6 7.2 21.8 -0.3 8.6 -5.0 Israel 0.0 6.0 8.1 10.2 8.9 -1.5 3.1 12.7 -3.9 -1.6 0.1 -0.7 -7.8 Japan -7.9 15.8 11.3 8.0 -13.1 -5.2 12.7 -7.5 -6.7 1.8 1.2 Korea -4.2 4.2 18.5 47.2 -15.3 14.2 -3.2 -3.9 -10.6 -2.6 Malaysia 0.3 12.0 30.3 -3.2 0.0 0.0 0.0 -0.0 0.0 -0.3 -3.2 -6.3 Mexico 90.2 18.4 15.4 4.6 -1.1 -1.2 11.7 -3.4 0.0 0.3 New Zealand -9.5 -4.6 23.4 15.9 -9.5 -20.2 -12.4 -11.7 Norway -10.2 1.9 9.6 6.6 3.3 12.9 2.1 -11.2 -11.4 -4.8 -4.4 -0.5 -8.7 Philippines -2.7 2.0 12.4 -4.4 13.1 15.4 1.2 5.0 -6.8 -10.1 Singapore -7.2 -0.5 5.4 12.5 1.4 1.8 3.9 -0.1 -2.7 -3.0 -1.5 -4.0 South Africa 2.1 18.5 20.0 10.6 13.8 24.2 21.9 -28.2 -14.7 -1.4 6.4 4.2 Sweden -7.5 -6.0 13.9 4.1 3.9 11.0 12.7 -6.0 -10.9 -9.1 -1.3 -8.4 Switzerland -13.5 4.6 17.3 -0.1 3.7 12.5 -0.1 -7.8 -13.6 -7.6 0.3 Thailand 1.7 22.5 33.0 -8.3 10.7 -3.3 -3.4 -0.1 -5.9 Turkey 54.8 77.8 86.8 71.7 60.6 49.3 96.0 23.0 -0.4 -5.0 -5.7 United Kingdom -2.9 1.1 -4.7 2.4 6.7 5.3 -4.2 -8.1 -10.8 0.7 -1.3 -7.9 United States1 -5.6 4.5 4.8 -1.6 4.9 6.0 -1.5 -12.3 -8.2 -1.0 -1.5 -5.8 Venezuela 19.0 136.1 17.1 10.6 12.3 6.5 60.4 38.4 17.7 0.0 'Percent appreciation (*) or depreciation (-) of the U.S. dollar against a group of currenciesWork Sheet : Statistical Report Country Korea ( 2001 2006 Six - year time period 2001 2002 2003 2004 2005 / 2006 Geom Ava Inflation Rate : Korea 4 0 12.8 13. 5 13 . 6 12.8 12.2 Inflation Rate : US 2.8 16 23 27 3 4 32 Interest Rate : Korea 4.7 14.2 14 0 13.7 13.4 14 .2 Interest Rate : US 37 17 12 16 35 15. 2 Change in CD SR (Indirec quote ) Change in CD SR Direct quote ) 1 / ( 1 to change in 19 ) - 1 PPP Implications Annual Uncovered Rate ( for US ) Annual Uncovered Rate ( for Korea ) Suggest investment strategy based on IFEShort - Term Interest Rates Annual percent Australia Canada Denmark Euro Area Indonesia Japan Malaysia MEXICO New Zealand Norway Philippine Singapore South Africa Sweden Switzerland Theland Turkey United kingdom United States Venezuela The actual value for 2093 2013 is GOT the actual we'll for 2604 is Da29 : the actual calls for Each is U .DES