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Part B is, a hedge fund in Boston. She can invest up to $5 lizes in carry trade transactions and notices a Voiving borrowing USD and investing in Australian dollars. The current Answer two of the three questions in this part. (20 points each) 1. 1. Katy Hegel works for Magnum Partners, a hedge fund in Boston million U.S. in a single transaction. She specializes in potential opportunity involving borrowing USD and inve interest rates and exchanges rates are: 5.25% p.a. 3.75% p.a. USD 0.8937/AUD USD 0.8810/AUD Australian invest rate: U.S. borrow rate Spot exchange rate Forward rate a. If Katy expects the USD/AUD exchange rate to stay about the same over the next year, much profit would he make on the carry trade if she invests in AUD for one year? If she covers the transaction with a forward contract how much profit would she make? b. c. What should Katy do? Part B is, a hedge fund in Boston. She can invest up to $5 lizes in carry trade transactions and notices a Voiving borrowing USD and investing in Australian dollars. The current Answer two of the three questions in this part. (20 points each) 1. 1. Katy Hegel works for Magnum Partners, a hedge fund in Boston million U.S. in a single transaction. She specializes in potential opportunity involving borrowing USD and inve interest rates and exchanges rates are: 5.25% p.a. 3.75% p.a. USD 0.8937/AUD USD 0.8810/AUD Australian invest rate: U.S. borrow rate Spot exchange rate Forward rate a. If Katy expects the USD/AUD exchange rate to stay about the same over the next year, much profit would he make on the carry trade if she invests in AUD for one year? If she covers the transaction with a forward contract how much profit would she make? b. c. What should Katy do

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