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6. Suppose the 6-month risk free spot rate in HKD is 1% continuously compounded, and the 6-month risk free rate in NZD is 3% continuously

6. Suppose the 6-month risk free spot rate in HKD is 1% continuously compounded, and the 6-month risk free rate in NZD is 3% continuously compounded. The current exchange rate is 5 HKD/NZD. (c) Suppose now that there are transaction costs is spot and forward exchange rates. That is, to buy NZD 1 you have to pay HKD 5.01 in the spot market today or HKD 5.03 in the 6-month forward contract, and to sell NZD 1 you receive HKD 4.99 in the spot market today or HKD 4.97 in the 6-month forward contract. Is there an arbitrage? If yes, describe an arbitrage strategy. If no, briefly explain why not

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