International Economics Questions 3

Please use APA format. This is a MBA course not an Associates Course so please be knowledgable in Economics in order to help. Also Please have access to the textbook. Substantial answers only please.

Course Textbook:

Krugman, P., Obstfeld, M., & Melitz, M. (2013). International economics: Theory and policy (9th ed). Upper Saddle River, NJ: Prentice Hall.

1) What is covered interest parity? What are the two assumptions of covered interest parity? How do investors use covered interest arbitrage to maximize their investment returns? At least 550 words.

2) Describe the key factors in foreign exchange market. Explain risk and liquidity as they relate for foreign exchange market.  (At least 550 words)