LINE COnneCtS single comparison. nst rates, spot exchange rate sand forward exchange rates in a b. What should be the 1-year forwards exchange rate for AUD/USD under the interest Rate Parity? USD will appreciate in year and AUD will depreciate (1%-3.5%) * 1 = -2,5% So the forward rate will be AUD/USD = 1.500 * (1 - 2.5) = -2.25 2) The spot exchange rate for UDS/euro is 1.15; the forward rate in 6 months for USD/euro is 1.12 US interest rate is 1.5% per year while Europe interest rate is 2.5% per year. You have 1,000,000 Euro to invest. a. Explain covered interest arbitrage b. Calculate the amount of USD you will have in 6 moths including interest income, by converting euro in spot rate and invest is US interest rate; C. Calculate the amount of euro you will have in one year by converting the USD back to Euro using the forward Rate; d. What will be the arbitrage profit in 6 months for 1,000,000 Euro using Covered Interest Arbitrage?