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Q1: (5 Marks) Helton Investment Co. is a Malaysian firm that executes a carry trade in which it borrows Pound and invests in US Dollar.

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Q1: (5 Marks) Helton Investment Co. is a Malaysian firm that executes a carry trade in which it borrows Pound and invests in US Dollar. Helton uses Malaysian Ringgit (MR) 150,000 of its own funds and borrows an additional 900,000 Pounds for 28 days and convert to US dollar. It will pay 6% annual interest on pounds borrowed and will earn 8% on funds invested in US dollar. Assume that the Pound's spot rate is 1.2 MR and that the US $ spot rate is MR.70 Helton uses today's spot rate as its best guess of the spot rate 28 days from now. Calculate Helton's expected profits from its carry trade. Q2: If Palestine experience an increase in inflation by 3%, and increase in interest rate by 1% how will their currency values (relative to the US $) be affected? show the answer by using a graph

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