Problem 6. On the Forex market, you observe the following hypothetical quotes:

Spot rate: $: = 110.00 (i.e., Japanese Yen per U.S. dollar or /$)

One-year interest rate in the US = 4%

One-year interest rate in Japan = 1%.

a) What should be the quote for the one-year forward exchange rate of Japanese Yen per U.S. dollar?

b) Suppose the one-year forward exchange rate quoted by Barclays is 110/$. Does the interest rate parity (IRP) hold? Is there an arbitrage opportunity? Suppose you were authorized to work with $1 million. How much arbitrage profit would you make assuming no transaction costs? Show the detailed steps you would take to make an arbitrage profit.

NOTE; NO NEED HANWRITNSOLUTIN