Assume that a U.S. based investor began applying a carry trade strategy by borrowing in the U.S. and investing in Turkey, as of November 2022. The corresponding interest rates are 3% in the U.S. and 30% in Turkey. The current spot rate between TL and USD is 18.6TL per USD. The strategy will be in place for a year, hence will end in November 2023. For each of the following cases calculate the U.S. based investor’s return from this carry trade strategy.

a) TL/$ spot rate is 20.0 as of November 2023

b) TL/$ spot rate is 22.0 as of November 2023

c) TL/$ spot rate is 24.0 as of November 2023

d) TL/$ spot rate is 26.0 as of November 2023

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To calculate the US based investors return from the carry trade strategy we need to consider the fol... View the full answer