1. xplain what is meant by the term "Quantitative Easing". Give examples of two countries which have used this technique and discuss whether or not it was successful, and state with supporting argument whether or not you believe this question would be appropriate for Caribbean Countries.
2. Stacey is a currency Speculator. She believes that the Euro will fluctuate widely against the U.S dollar in the coming month. Currently, one-month call options on Euro are available with a strike price of $1.10 and a premium of $0.025 per unit. One-month put options on Euro are available with a premium of $0.017 per unit. One option contract on Euro contains 500,000 Euro.

Required:

1. What type of derivative should Stacey enter into? Explain why she should choose this type of derivative.
2. Construct a contingency graph representing Stacey's expected payoff on her chosen type of derivative if she takes a long position in this derivative. (In (i) above)