1. Suppose the annual lending rate in Japan is 2% and the annual rate for a deposit at a bank in the United States is 5%. Suppose the exchange currency rate for each US dollar is equal to 150 Japan Yuan and fixed for a year without any change. Suppose there is no transaction cost for lending and deposit in US and Japan. What is the arbitrage amount for a million US dollar deposited in a US bank for a year? If the exchange rate is floating, what is the exchange rate at the end of one year for each US dollar to Japan Yuan in order to avoid the arbitrage opportunity? (The interest is always calculated compounding continuously.) 2. (a) Explain the difference between the future and option. (b) Explain the difference among American option, Asian option and European option. Can you compare the values among those options for a same security with the same strike price and the same expiration date