Charles Naidoo is a foreign exchange trader with Citibank. He notices the following quotes. Spot exchange rate CHF1.2051/US$ 1 year forward exchange rate CHF1.1922/US$ 1 year US$ interest rate 1.25% per annum 1 year CHF interest rate 3.75% per annum 1.1 Is the interest rate parity holding? You may ignore transaction costs. [2] 1.2 Is there an arbitrage opportunity? If yes, show what steps need to be taken to make arbitrage profit. Assuming that Charles Naidoo is authorised to work