1)Use the following information to answer the next two questions.

An investment banker in Spain notices that 1 year interest rates in Spain and Mexico are 12% and 8%, respectively. Current spot rates are as follows:

1.02/$, $.15/MP. The one year forward rate is .18/MP.What should the forward premium be for IRP to hold? a) .037 b) -.0357 c).04 d)-.04

2)Assuming that the banker has access to one million euros, find his covered interest arbitrage profit (in euros). Round intermediate steps to four decimals.

a)197700 b)201600 c)150600 d)0