Assume that annual interest rates are $6\%$ in the United States and $8\%$ in Switzerland. An FI can borrow $($by issuing CDs$)$ or lend $($by purchasing CDs$)$ at these rates. The spot rate is Sf$1\mathrm{.}35/$$$.$

a$.$ If the forward rate is $Sf\frac{1\mathrm{.}4}{\text{\$}},$ how could the bank arbitrage using a sum of $Sf1$ million? What is the spread earned? $(5$ points$)$

b$.$ What is the forward rate based on Interest Rate Parity? $(4$ points$)$