City Bank issued $200 million worth of one-year CDs in the United States at an interest rate of 6.5 percent. It invested part of the proceeds - $100 million in one-year U.S. bonds paying 7 percent and $100 million in Brazilian government bonds paying 8 percent. The current exchange rate is REAL1/S.

   (1). What would be the net return on $200 million invested in bonds if the Brazilian and US currencies were unchanged?

(2). If the Brazilian and US currency exchange rate falls to REAL1.2/$, what is the net yield of $2 billion invested in bonds?

(3). If the Brazilian and US currencies exchange rate rises to REAL 0.8 /$, what is the net yield on the $200 million invested in the bonds?