Date: January 1, 2020: Suppose you are a fund manager in London with $1 million for the next 3 months.

3-month TL interest rates = 20% or 0.2

3 months Eurodollar LIBOR=3% or 0.03

As TL pays higher interest, our fund manager decided to invest in the Turkish Lira.

Spot: 1 USD = 6.00 TL

Thus, our fund manager purchases: 6,000,000 TL (Formula: 1000000*6.00)

3-month term deposit in TL account

Our fund manager will receive on March 31, 2020: 6.300.000 TL

a) Let's assume that the spot dollar/TL rate on March 31, 2020 is 6.3 TL per dollar. Is our dollar-based fund manager better than staying on Eurodollar? (Show your calculations)

b) Let's say on January 1, 2020, our London fund manager sells the future Turkish Lira at 6.25 TL per dollar in addition to the TL earning asset. Coming March 31, 2020. Is our dollar-based fund manager better than staying with Eurodollars? (Show your calculations)