b$)$ Assume that the one$-$year interest rate is $3\%$ p$.$a$.$ in the UK and $2\%$ p$.$a$.$ in the Euro area. Also,

assume that the current spot exchange rate of one pound to the euro is $1\mathrm{.}1500/$ and that the

corresponding one$-$year forward exchange rate is $1\mathrm{.}1400/.$

i$)$ Use calculations to show whether the Interest Rate Parity $($IRP$)$ theory holds.