You are the fund manager of ABC Fund, based in New York. You noticed that the Egyptian T-Bills are offering one of the most competitive interest rates worldwide, and you perceived it as a lucrative investment opportunity. On 1st Jan 2020 your fund decided to invest in the Egyptian treasury bills that pays 14.5% annually and for this you transferred USD 1 million to Egypt. Money was converted in a bank which quoted a USD/EGP rate of 15.50/15.60. On 31st Dec 2020, T-Bills matured and interest was recognized. USD/EGP on 31st Dec 2020 quotation was 15.70/15.80

a. Calculate in US$ terms the net profit / loss ABC Fund made on its investment in Egypt. (show all steps)

b. If the prevailing market interest rate on USD deposits at time of investment (1/1/2020) was 2.75%, would it have been better for ABC Fund to keep its funds as a USD deposit? Explain.

c. If the prevailing exchange rate on 31/12/2020 was USD/EGP 17.50/17.60 would it have been better for ABC to keep its funds in Dollars or still invest in Egyptian T-Bills? Explain.