Question 2 5 pts Suppose that the annual interest rate isl.5 percent in the United States and 3 percent in Germany, and that the spot exchange rate is $1.57/ and the forward exchange rate, with one-year maturity, is $1.58/. Assume that an arbitrager can borrow up to $1,000,000 or 625,000. If an astute trader finds an arbitrage, what is the arbitrage profit in one year? $46,207 10,262 $21,561 O 13,390 Question 3 5 pts The Mexican peso/USS spot exchange rates in December 1997 and December 1998 were 6.3 and 7.0, respectively. During 1998 inflation rates in Mexico and US were at 23% and 5%, respectively, and the one-year interest rates in December 1998 in pesos and dollars were 15% and 8%, respectively. What happened to the real value of the peso during 1998? o Mexican peso depreciated by 7.00% against US dollar Mexican peso appreciated by 5.43% against US dollar Mexican peso appreciated by 7.00% against US dollar Mexican peso depreciated by 5.43% against US dollar Question 4 5 pts You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-curo exchange rate is quoted as $1.53 = 1.00 and the dollar-pound exchange rate is quoted at $1.831.00. If a bank quotes you a cross rate of 1,00 - 1.12 how much money can an astute trader make? O $41,667 $67,927 $160,000 O No arbitrage is possible Question 5 5 pts On November 1, 1999, the exchange rate between the Brazilian real and U.S. dollar is R$1.95/$. The consensus forecast for the U.S. and Brazil inflation rates for the next 3-year period is 2.6% and 20.0% per year, respectively. What would you forecast the exchange rate to be at around November 1, 2002? R$3.6673/5 O R$2.2807/5 RS2.6675/8 R$3.1199/8