1 Covered Interest Rate Parity (10 Points) You observe the following current quotes on the Chinese yuan (CNY) and the Hong Kong dollar (HKD) exchange rates and interest rates. Bid Ask CNY/HKD (Base Currency/Quote Currency) Spot 3-Month Forward 1.0939 1.0811 1.0945 1.0823 Bid Ask 3-Month Interest Rate (per annum CNY HKD 3.85% 4.23% 0.86% 0.91% 1. (1 Points) Does an arbitrage opportunity exist? 2. (9 Points) If so, outline an arbitrage strategy and explain step by step why your strategy yields risk-free profits