Assume the following information:

Spot rate of Canadian Dollar 0.4400

90 day forward rate of Canadian Dollar 0.4345

90 day Canadian interest rate -4%

90-day U.K interest rate - 2.5%

Required

a) Show the IRP does not hold

b) Assume a U.K investor has 100,000. Determine the excess returns she would earn if she engaged in covered interest arbitrage than if she invested in her country