Currently, the spot exchange rate is $0.85/A$ and the one-year forward exchange rate is $0.81/A$. One-year interest is 3.5% in the U.S. and 4.2% in Australia. You can borrow up to $1,000,000 or A$ 1,176,471, which is equivalent to $1,000,000 at the current spot rate

a. Determine if IRP holds (exactly) between Australia and the United States

b. If IRP doesnt hold, explain in detail how you would realize certain profit in U.S. dollar terms.

c. Explain how IRP will be restored as a result of the arbitrage transactions you carry out above.