Currently, the spot exchange rate is USD/AUD = 0.85 and the one-vear forward exchange rate is USO/AUD = 0.90. One-year opportunity for a covered interest rate arbitrage You muy borrow up to 1.000000 units of focal currency (li e. either 1.000 .0 USD or 1,000.000 AUD). 1. Decide and explain whether the covered interest rate parity holds. 2. If the covered interest rate parity does not hold, decide and explain whether you should borrow funds in USO or in AVIS 3. Describe each step you would need to take to earn risk-less arbitrage profit and compute the arbitrate profit