Charles Naidoo is a foreign exchange trader with Citibank. He notices the following quotes. Spot exchange rate 1 year forward exchange rate 1 year US$ interest rate 1 year CHF interest rate CHF1.2051/US$ CHF1.1922/US$ 1.25% per annum 3.75% per annum [2] 1.1 Is the interest rate parity holding? You may ignore transaction costs. 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 with US$1 000 000, compute the arbitrage profit in dollars. [10]