a) A portfolio manager has been able to beat the market over the last 5 years (i.e. her portfolio has a mean return over the last 5 years that exceeds the market's mean return over the same period). Does this provide evidence against the efficient markets hypothesis? Discuss. (5 marks) b) Today, the 2-year spot interest rate in the UK is 0.1%. The 2-year spot interest rate in the US is 1.16%. The spot FX market tells me that 1 is worth exactly $1.25 today. If the market two-year forward exchange rate of Sterling for US Dollars is $1.29 per 1, demonstrate whether an arbitrage is available and, if so, demonstrate how to exploit it. (5 marks) a) A portfolio manager has been able to beat the market over the last 5 years (i.e. her portfolio has a mean return over the last 5 years that exceeds the market's mean return over the same period). Does this provide evidence against the efficient markets hypothesis? Discuss. (5 marks) b) Today, the 2-year spot interest rate in the UK is 0.1%. The 2-year spot interest rate in the US is 1.16%. The spot FX market tells me that 1 is worth exactly $1.25 today. If the market two-year forward exchange rate of Sterling for US Dollars is $1.29 per 1, demonstrate whether an arbitrage is available and, if so, demonstrate how to exploit it