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Use the following information for the ext two questions. US interest rate 3% UK interest rate 6% Canadian interest rate 5% Japanese interest rate 0%

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Use the following information for the ext two questions. US interest rate 3% UK interest rate 6% Canadian interest rate 5% Japanese interest rate 0% Mexico interest rate 9% Spot Rates: 1 UK 1.6 US 1 US 1.2 Canada 1 US - 100 Japan 1 US # 10 Mexico 1) Explain what is meant by the carry trade, how the carry trade differs from interest rate parity, how the carry trade would be done with the informati above, and what risks the carry trade entails. Carry trade neant

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