Assume that the interest rate is 16% on pounds sterling and 7% on euros. At the same tim nflation is running at an annual rate of 3% in Germany and 9% in England. a. If the euro is selling at a one-year forward premium of 10% against the pound is there an arbitrage opportunity? b. What is the real interest rate in Germany? In England? Suppose that during the year the exchange rate changes from 1.8/ to 1.77/. Assume that a German company borrowed for one year in terms of pounds at the beginning of the year, and calculate the realized cost of borrowing in terms of euro without any hedging. Contrast this cost to its cost of borrowing in terms of euros