IRP arbitrage$2$

a$.$

If the interest rate in the United Kingdom is $6$ percent, the interest rate in the United States is $4$ percent, the spot exchange rate is $$\frac{1\mathrm{.}5726}{}1,$ and interest rate parity holds, what must be the one$-$year forward exchange rate? $($Do not round intermediate calculations. Round your answer to $4$ decimal places. $($e$.$g$.,32\mathrm{.}1616))$

One$-$year forward exchange rate

$ per $$

b$.$

If the forward rate is actually $$\frac{1\mathrm{.}5419}{}1,$ would you borrow in dollars or pounds to make an arbitrage profit?

$$ Dollars

$$ Pounds

c$.$

If you can borrow either $$1$ million or $1$ million $($borrow in currency identified in previous part$)$ to capitalize on the arbitrage profit using the actual forward rate of $$\frac{1\mathrm{.}5419}{}1,$ what is your arbitrage profit at the end of the year expressed in $ dollars? $($Do not round intermediate calculations. Round your answer to $4$ decimal places. $($e$.$g$.,32\mathrm{.}1616))$