Question: 1. Explain the difference between covered and uncovered interest parity 2. You have $2000. The current interest rates on dollar-and pound- denominated deposits for 180-day

1. Explain the difference between covered and uncovered interest parity 2. You have $2000. The current interest rates on dollar-and pound- denominated deposits for 180-day maturity are 2% and 3%, respectively. The current spot exchange rate is e-$2/1. What are your three basic choices of strategy over the next 180 days? 3. Suppose that the treasurer of IBM has an extra cash reserve of $100,000,000 to invest for six months. The six-month interest rate is 9 percent per annum in the United States and 5 percent per annum in Germany. Currently, the spot exchange rate is 1.30 per dollar, the expected future exchange rate after six months is 0.7 per dollar. and the six-month forward exchange rate is 1.80 per dollar. The treasurer of IBM may bear an exchange risk to maximize his/her return. What is the best investment strategy for the treasurer to maximize the return? Use equations to explain your

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