1. 5 pts)The 6-month forward discount for converting the U.S. dollar into the British pound is 34% and 6-month U.S. Treasury bills yield 1.56%. Based on interest rate parity, what should be the 6-month British Treasury bill yield?

2. (10 pts)The current exchange rate is one Australian dollar (AUD) equal to 1.349 USD. In the United States, the 6 months T-bill rate is 84%. The 6-month forward rate for AUD is .75 USD/AUD. Assuming that interest rate parity exists, what is the implied interest rate for Australia?

3. (15 pts)Suppose the following conditions exist between the U.S. and Canada. 6 month U.S. interest rate = 4.5%. Canadian interest rate = 4%. Spot rate: 1 CAD = .9537 USD. 6 month forward rate: 1 CAD = .9612 USD. Are the conditions of interest rate parity violated? If so, what would be our profit if we engaged in covered interest arbitrage by borrowing $2M in the U.S.?