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Show calculations please Date: 1 January 2020: Suppose you are a fund manager in London with spare $1million for the coming 3 months 3 months

image text in transcribedShow calculations please

Date: 1 January 2020: Suppose you are a fund manager in London with spare $1million for the coming 3 months 3 months TL interest rates = 20% or 0,2 3 months Eurodollar LIBOR=3% or 0,03 Thus since TL pays a higher interest rate our fund manager decides to invest in Turkish Liras Spot: 1 USD = 6.00 TRY Thus our fund manager purchases: 6.000.000 Formula: 1000000*6.00 Deposits that sum in a TL account for 3 months on 31 March 2020 our fund manager will have: 6.300.000 a) Suppose on 31 March 2020 the spot dollar/TL exchange rate is 6.3 TL per dollar. in dollar terms is our fund manager better off compared to staying in Eurodollars? b) Suppose on 1 January 2020, our London fund manager in addition to investing in TL paying asset, sells her/his future Turkish liras forward for 6.25 TL per dollar. Comes 31 March 2020. in dollar terms is our fund manager better off compared to staying in Eurodollars

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