Please

3-month interest rate is 8.0% per annum in the US. and 5.8% per annum in the U.K. Investors can borrow either $1,500,000 or the equivalent amount at the current spot rate. (1) A US. MNC would like to invest its extra cash reserve of $1,500,000 in a 3-month deposit. 1. The spot exchange rate is $1.50/K. The three-month forward exchange rate is $1.52/6. The How should the extra cash reserve be invested? Justify with cash flow analysis that summarizes both actions to take and net result. s there any covered interest arbitrage (CIA) opportunity for a dollar-based investor? If yes, show (3) Is there any covered interest arbitrage (CIA) opportunity for a pound-based investor? If yes, (4) Specify how CIA activities help restore the market equilibrium described by interest rate parity his CIA process and calculate his arbitrage profit. demonstrate his CIA process and calculate his arbitrage profit amount. IRP) The current price level in the U.S. is $14,000 per consumption bundle, and 10,000 per consumption bundle in the U.K.. The current exchange rate is $1.65/E. The annual inflation rate is expected to be 2% in the US, and 5% in the U.K. (1) Assume weakens against dollar by 4% in the next year. Discuss the change of GBP's 2. purchasing power in U.S. in the next year. Discuss the change of GBP's purchasing power in U.K. in the next year. Which country will become more competitive in the world market than before? Explain with calculations. (2) In what situation the relative purchasing power of USD will not change in the next year