Assume the following : spot rate is PKR1.8438=PHP1 180 day forward rate is PKR1.8610=PHP1 180 day PKR interest rate is 7.00%p.a. 180 day PHP interest rate is 4.50%p.a. Does Interest Rate Parity (IRP) exist ? Why or why not ? (Show all working) As an arbitrageur seeking to make a profit only, you are authorised to use either PKR20 million or PHP20 million as your starting point. Assume you can borrow or invest at the above interest rates, calculate exactly a cash covered interest rate arbitrage. Will you make a profit ? (Show all working) The ending profit, if any, should be realised in, either, PKR or PHP depending on your strategy above. (PKR=PakistanRupee, PHP=Philippine Peso) What is the percentage yield over 180 days ? (in, either, PKR or PHP depending on your strategy above) (Show all working) (You may use simple interest & a 360 day year).