:Consider that you are a forex trader looking to profit from the carry trade strategy. You notice that the interest rate in Country A is 1% and in Country B it is 5%. You decide to borrow in the currency of Country A and invest in the currency of Country B.1) What is your expected profit from the interest rate differential alone, assuming no change in the exchange rate?2) Now, suppose that over the course of your investment, the currency of Country A appreciates against the currency of Country B by 2%. How does this affect your carry trade strategy and what would be your overall profit or loss?

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