1. You observe that one U.S. dollar is currently equal to 24 Mexican pesos in the spot market. The one year US interest rate is 4% and the one year Mexican interest rate is 8%. One year later, you observe that one U.S. dollar is now equal to 26 Mexican pesos in the spot market. You would have made a profit if you had borrowed Mexican pesos and invested in U.S. dollars. How do you calculate the profit.

2. As of today, the spot exchange rate is 1.00 = $1.60 and the rates of inflation expected to prevail for the next year in the U.S. is 2% and 3% in the euro zone. What is the one-year forward rate that should prevail?

3. Suppose you observe a spot exchange rate of $1.50/. If interest rates are 5% APR in the U.S. and 3% APR in the euro zone, what is the no-arbitrage 1-year forward rate?

4. You observe that the expected rate of inflation over the next year is 3.53% and current one year Treasury bills are yielding 5.82%. Based on the domestic Fisher effect, what is the approximate one year real rate of interest?

5. Suppose that the annual interest rate is 2.0 percent in the United States and 4 percent in Germany, and that the spot exchange rate is $1.60/ and the forward exchange rate, with one-year maturity, is $1.58/. Assume that an arbitrager can borrow up to $1,000,000 or 625,000. If an astute trader finds an arbitrage, what is the net cash flow in one year?

Please show your work. I am having trouble with my formulas and I need some help. Thank you.