2. a) If the interest rate in USD is 1%, and is 1.7% for Euro deposits, find the forward price of a Euro in a 3 year contract when the current exchange rate is 1.10 dollars per Euro. b) If the 3-year Forward price of a Euro is currently 1.09, how could you use the synthetic to do arbitrage? Hint: Follow these steps. i. What should be the price? Compare with 1.09. ii. Are you buying to selling Euros in the forward contract? Are you building a synthetic for buying or for selling Euros? iii. Draw the synthetic thut you need, identify cach element. iv. Tell yourself the story with the respective amounts. Assume 1 euro in the curo-flows of period o. (llint: start with an inflow in t=0) . Verify that you keep profits at maturity equal to the difference in prices in step