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

Suppose you conduct currency carry trade by borrowing $1 million at the start of the year and investing in New Zealand dollar for one year. The 1-year interest rate is 2.00 percent per annum in the United States and 8.00 percent per annum New Zealand. At the start of the year the spot exchange rate was NZ$1.90/$. At the end of the year the spot exchange rate turns out to be NZ$2.00/$. Compute the USD profit (loss) from this carry trade.

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