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Suppose you are quoted the following EUR/USD spot and forward rates: Spot bid-ask 3-month forward bid -ask p.a. 3-month interest rate bid-ask EUR USD 5.50-5.60 4.00-4.40 0.80-0.90 0.85-0.92 (i) What are the 3-month synthetic-forward EUR/USD bid-ask rates? (10 marks) (*) Are there any arbitrage opportunities? Are there any opportunities for least-cost dealing at the synthetic rate? If yes, explain how you would take advantage of them. (10 marks) 4. (a) Using the replication approach, derive the market value of an outstanding forward purchase contract. What is the market value of a forward purchase contract at expiration? Briefly justify your