Question: You are required to answer the questions below and explain your calculations, using, as appropriate, numbers, words and diagrams. References are not expected or required

You are required to answer the questions below and explain your calculations, using, as appropriate, numbers, words and diagrams. References are not expected or required to answer these questions. Question 1 A trader, who is considering uncovered interest arbitrage between the US dollar (USD) and Australian dollar (AUD), faces the following data: Funds available: 2 million USD Spot exchange rate: 0.94 AUD per USD Spot exchange rate one year ago 1.00 AUD per USD USD 3-month interest rate: 0.12% per annum AUD 3-month interest rate: 4.69% per annum Required (1) Calculate the profit that would be made if the exchange rate remains at its current level in three months' time; (2) How would the profit figure change if the Australian dollar continues to strengthen at the same rate as it has done over the previous year

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