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Suppose that the annual interest rate is 5 percent in the United States and 8 percent in Mexico, and that the spot exchange rate is USD0.0493/MXN and the forward exchange rate, with one- year maturity, is USD0.0491/MXN. Assume that you can borrow up to $1,000,000. 1. (10 points) Show whether or not IRP is holding under current market conditions. 2. (15 points) Demonstrate how you can take advantage of an arbitrage opportunity, if any. Step 1: Step 2: Step 3: 3. (10 points) Compute any arbitrage profit (guaranteed profit), if any. 4. (15 points) Describe how arbitrage activities affect currency spot and forward markets and two countries' credit markets such that IRP holds