Suppose you conduct currency carry trade by borrowing $1,000,000 at the start of each year and investing

Question:

Suppose you conduct currency carry trade by borrowing $1,000,000 at the start of each year and investing in the New Zealand dollar for one year. One-year interest rates and the between the U.S. dollar ($) and New Zealand dollar (NZ$) are provided below for the period 2000-2009. Note that interest rates are one-year interbank rates on January 1 each year, and that the is the amount of New Zealand dollar per U.S. dollar on December 31 each year. The was NZ$1.9088/$ on January 1, 2000. Fill out columns 4-7 and compute the total dollar profit from this carry trade over the 10-year period. Also, assess the validity of uncovered interest rate parity based on your solution of this problem. You are encouraged to use the Excel spreadsheet software to tackle thisproblem.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...