(15 points) Consider a spot exchange rate of $1.50/E and a 3-month forward exchange rate of $1.52/L Assume a 3-month interest rate of 8% pa. in the US. and 5.8% pa. in the UK. Assume that you can borrow as much as S1,500,000 or 1,000,000. (You may choose the borrowing currency.) Determine whether interest rate parity (IRP) is holding. (Answer yes or no and show why. If IRP does not hold, what four steps would be necessary to carry out covered interest arbitrage? Calculate your profit for one round of the available arbitrage. a. b. c