Suppose you were considering investing US$100,000 in a government treasury bond for one year in one of the following five countries.

	T-Bond Interest rate (% per year)	Expected % change in currency next year with respect to the US$
US	3.0	--
Japan	-0.5	-5.0
Korea	1.0	+4.0
Brazil	7.0	-10.0
Turkey	20.0	-20.0

1. (2) If the todays Japanese yen/$ exchange rate is 100 Yen/$. Use the info in the table to calculate what the exchange rate is expected to be next year.

2. (1) It is possible with a quick look at the numbers in the table to determine which country has the lowest expected rate of return next year. Which country is that?

3. (2) Calculate the precise expected rate of return (in percentage, to the second decimal) ONLY for the country that has the lowest rate of return.

4. (2) Calculate the precise expected rate of return (in percentage, to the second decimal) ONLY for the country that has the highest rate of return.

5. (1) If your prime objective is to minimize exchange rate risk, which country should you invest in?

6. (1) If the expectations and RoRs above represented the average expectations across all international investors across all investments, then what would you expect would happen to the value of the US dollar relative to the Korean won? State why.