Given the following information,

Spot rate of the British pound, = US$1.596

Spot rate of the Australian dollar, A$ = US$0.70

Cross exchange rate: 1 = A$2.28

One-year forward rate of the Australian dollar, A$ = US$0.71

One-year forward rate of the British pound, = US$1.58004

One-year U.S. interest rate = 8%

One-year British interest rate = 9.09%

One-year Australian interest rate = 7%

a. Determine whether triangular arbitrage is feasible, and if so, how it should be conducted to make a profit. [5 marks]

b. Use the international Fisher effect theory to forecast the annual percentage change in the British pounds value over the year. [5 marks]

c. Determine whether covered interest arbitrage is feasible and, if so, how it should be conducted to make a profit. [10 marks]