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10 points 18. James Chang, a foreign exchange at J.P. Morgan Chase, can invest 100 million or 100 million of the bank's short-term funds in coverage interest arbitrage with the Euro. He has the following quotes. Spot exchange rate E1230/ 180-day forward rate EL 250/E 180-day euro interest rate 3.00% per year (1.5% for 180 days) 180 day pound interest rate 4.00% per year (2.0% for 180 days) Clearly explain how James Chang can make a covered interest arbitrage Pos 9 2 7 $1, 300.873 x 1.07 382,926, 8129127 2.9.26,829:27 X 1.25 : 1031658 1 -101,500,000 10 points The United States runs a significant trade deficit with the rest of the world. Explain how this imbalance should be corrected under: c) A fixed rate regime? . A floating rate regime? currency USD. Depreciatia ting its a The market would corrected it in anatural way.by reducing usd valve against its currency