kindly provide me a detailed solutions and explain each steps

just provide solution to number 2

1) Explain the theory of Purchasing Power Parity and discuss its usefulness as a tool for predicting movements in foreign exchange rates (15 marks) 2) You have the following market data: $ 1.092 $ 1.115 $/ Spot exchange rate $/ 6 month Forward rate 1 year interest rate $ 1 year interest rate 2.00% 0.95% 2 of 4 Using the above exchange rates and interest rates demonstrate how a risk free profit could be generated using covered interest arbitrage