Question $4(6$ points$)$: Currency Carry Trade $($Chapter $6)$

Suppose you conduct currency carry trade by borrowing $$1$ million at the start of each year and

investing in New Zealand dollar for one year. One$-$year interest rates and the exchange rate

between the U$.$S$.$ dollar $($$$)$ and New Zealand dollar $($NZ$$)$ are provided below for the period

$2000-2001.$ Note that interest rates are one$-$year interbank rates on January $1^{st}$ each year, and

that the exchange rate is the amount of New Zealand dollar per U$.$S$.$ dollar on December $31$

each year. The exchange rate was NZ $$\frac{1\mathrm{.}9088}{\text{\$}}$ on January $1,2000.$ Fill out the columns $(4)-$

$(7)$ and compute the total dollar profits from this carry trade. Also, assess the validity of interest

rate parity based on your solution of this problem.