1. a) Assume that inflation in the United States is expected to be 9 percent, while inflation in Australia is expected to be 5 percent over the next year. Today you receive an offer to purchase a one-year put option for $.03 per unit on Australian dollars at a strike price of $0.72. Today the Australian dollar is quoted at $0.70. You believe that purchasing power parity holds. Should you accept the offer and why?

1 b.) If international fisher effect IFE exists, then ___ is not feasible

uncovered interest arbitrage, locational arbitrage, covered interest arbitrage, or forward realignment arbitragg