Consider the following:

Risk-free rate in the USA 0.04/year

Risk-free rate in Australia0.03/year

Spot exchange rate 1.67 A$/$

a. What should be the proper futures price for a 1-year contract?

b. If the futures market price is 1.63 A$/$, how could you arbitrage?

c. If the market futures price is 1.69 A$/$, how could you arbitrage?

d. Assume the current market futures price is 1.66 A$/$. You borrow 167,000 A$ and convert the proceeds to U.S. dollars and invest them in the U.S. at the risk-free rate. You simultaneously enter a contract to purchase 170,340 A$ at the current futures prices (maturity of 1 year). What would be your profit (loss)?