A trader, who is considering a 'carry trade' transaction between Sterling (GBP) and Polish Zloty (PLN),...

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A trader, who is considering a 'carry trade' transaction between Sterling (GBP) and Polish Zloty (PLN), faces the following data: Funds available to borrow: Spot exchange rates 2 million GBP 0.6603 GBP per USD 3.1166 PLN per USD GBP 3-month interest rate: PLN 3-month interest rate: 0.49% per annum 3.55% per annum Current UK inflation rate: 2.7% per annum Current Polish inflation rate: 1.7% per annum Required (a) Calculate the current PLN/GBP cross rate; (b) Calculate the profit that would be made if the exchange rate remains at its current level in three months' time; (c) How would the profit figure change if the exchange rate varies in line with relative purchasing power parity (RPPP) as predicted by current inflation? A trader, who is considering a 'carry trade' transaction between Sterling (GBP) and Polish Zloty (PLN), faces the following data: Funds available to borrow: Spot exchange rates 2 million GBP 0.6603 GBP per USD 3.1166 PLN per USD GBP 3-month interest rate: PLN 3-month interest rate: 0.49% per annum 3.55% per annum Current UK inflation rate: 2.7% per annum Current Polish inflation rate: 1.7% per annum Required (a) Calculate the current PLN/GBP cross rate; (b) Calculate the profit that would be made if the exchange rate remains at its current level in three months' time; (c) How would the profit figure change if the exchange rate varies in line with relative purchasing power parity (RPPP) as predicted by current inflation?