please solve it

1. (Ch. 3) Cross Exchange Rate. Assume USD 1 is worth 74.315 Argentine Peso (ARS), and USD 1 is also worth 771.40 Chilean Peso (CLP). What is the definition of the cross rate ARSCLP? (4 points) How much is the cross rate ARSCLP? ( 4 points) 2. (Ch. 3) Bid-Ask Spread. You and your sister, Jane, plan to participate in the "Study Abroad" program this winter. You plan to go to Frankfurt, Germany and Jane will visit Tokyo, Japan. Both of you need to transfer your USD to the respective foreign currency right now. Here is the market data: EURUSD spot rate: the big figure is 1.19; market quotes are: 92/95. USDJPY spot rate: the big figure is 106; market quotes are: 65/68. a. What is the exchange rate that you will use to buy EUR? ( 4 points) What is your bid-ask spread in percentage? ( 4 points) b. What is the exchange rate that Jane will use to buy JPY? (4 points) What is her bid-ask spread in percentage? ( 4 points) c. What are the EURJPY cross-exchange bid and ask rates, assuming there is no transaction cost, and the liquidity is very similar? (make sure you use the correct bid or ask rate)(8 points) What is the bid-ask spread in percentage for EURJPY? ( 2 points) 3. (Ch. 3) Carry Trade a. Explain "carry trade." ( 3 points) b. If the interest rates for the GBP, USD, and JPY are 6%,4%, and 1%, respectively, and you would like to have a carry trade, which currency would you like to borrow? (2 points) Why? ( 3 points) c. If you have a carry trade, what may you earn? ( 3 points) What risk may you have? (3 points) d. What will be expected in practice if everyone in the markets is doing the same thing with you (carry trade)? ( 3 points)