Investing interest rates in Argentina (ARS) are 47% p.a. and in Indonesia (IDR) they are currently at 3.5% p.a. The ARS/IDR spot rate is 119.94 (a) Assume no transaction costs. Calculate the theoretical two-year forward rate of the ARS implied by Interest Rate Parity. (b) Now assume transaction costs exist. The new spot rate to use is 117.00 / 122.00: The actual two-year forward rate is ARS/IDR 64.00 / 69.00: Interpret your answer to (a) and the information in (b) to determine in which country you should invest to try to exploit any mispricing. (c) What, if any, is the percentage return from engaging in Covered Interest Arbitrage? For part (c) assume that borrowing rates are 5% higher than the investing rates in both countries. Your answer will be either (choose the appropriate one): A. Arbitrage: Calculate the result as a percentage of your initial borrowing making sure to include any opportunity costs in your calculations. B. No arbitrage: If there is no arbitrage available then show how you are unable to make money through a covered interest arbitrage process. Investing interest rates in Argentina (ARS) are 47% p.a. and in Indonesia (IDR) they are currently at 3.5% p.a. The ARS/IDR spot rate is 119.94 (a) Assume no transaction costs. Calculate the theoretical two-year forward rate of the ARS implied by Interest Rate Parity. (b) Now assume transaction costs exist. The new spot rate to use is 117.00 / 122.00: The actual two-year forward rate is ARS/IDR 64.00 / 69.00: Interpret your answer to (a) and the information in (b) to determine in which country you should invest to try to exploit any mispricing. (c) What, if any, is the percentage return from engaging in Covered Interest Arbitrage? For part (c) assume that borrowing rates are 5% higher than the investing rates in both countries. Your answer will be either (choose the appropriate one): A. Arbitrage: Calculate the result as a percentage of your initial borrowing making sure to include any opportunity costs in your calculations. B. No arbitrage: If there is no arbitrage available then show how you are unable to make money through a covered interest arbitrage process