Need help solving Q4 and feedback on Q1,2,3
Please answer the following five questions. QI. During the assigned time period: US dollar appreciated/ depreciated (choose one) in real terms against the currency of the foreign country Q2. During the assigned period, what was the average uncovered rate of return from the: (a) US viewpoint? 10.44 (b) Foreign country's viewpoint? -1.2887 Q3. Based on your answers to questions 2, given perfect hindsight about interest rates and exchange rates changes during the assigned time period you should have: Invested borrowed choose one) in the US and invested/ borrowed (choose one) in the foreign country. Q4. Assume that during the assigned time period you could both borrow and invest at the average interest rates prevailing in foreign country and the US. Also assume that you have a line of credit for one million dollars in the US and an equivalent amount in the foreign country. Given perfect hindsight about interest rates and exchange rates changes in these two countries, please calculate your total profit in dollars using uncovered interest arbitrage during the assigned time period based on your strategy recommended in Q3: UK 2004-200t Foreign Country Assigned Time Period: Average Economic Variables 2.a25 Inflation Rate: US 2.914 3.862 5.009 -4.854 5.208 10.L Inflation Rate: Foreign Country Interest Rate: US Interest Rate: Foreign Country Percentage change in indirect quote: Foreign Country Percentage change in direct quote: Foreign Country Uncovered rate of return from US viewpoint from UK vieupoint 1.88 / Please answer the following five questions. QI. During the assigned time period: US dollar appreciated/ depreciated (choose one) in real terms against the currency of the foreign country Q2. During the assigned period, what was the average uncovered rate of return from the: (a) US viewpoint? 10.44 (b) Foreign country's viewpoint? -1.2887 Q3. Based on your answers to questions 2, given perfect hindsight about interest rates and exchange rates changes during the assigned time period you should have: Invested borrowed choose one) in the US and invested/ borrowed (choose one) in the foreign country. Q4. Assume that during the assigned time period you could both borrow and invest at the average interest rates prevailing in foreign country and the US. Also assume that you have a line of credit for one million dollars in the US and an equivalent amount in the foreign country. Given perfect hindsight about interest rates and exchange rates changes in these two countries, please calculate your total profit in dollars using uncovered interest arbitrage during the assigned time period based on your strategy recommended in Q3: UK 2004-200t Foreign Country Assigned Time Period: Average Economic Variables 2.a25 Inflation Rate: US 2.914 3.862 5.009 -4.854 5.208 10.L Inflation Rate: Foreign Country Interest Rate: US Interest Rate: Foreign Country Percentage change in indirect quote: Foreign Country Percentage change in direct quote: Foreign Country Uncovered rate of return from US viewpoint from UK vieupoint 1.88 /