Rus Neft, the national oil company of Russia, is a large, sophisticated, and active participant in both the currency and petrochemical markets. Although it is a Russian company, it operates within the global oil market. Ana Kirilenkova is a currency trader for Rus Neft, and has immediate use of either $5 million (or the Russian ruble equivalent). She is faced with the following market rates, and she would like to make arbitrage profit in the coming 90 days.

Spot exchange rate (RUB/$): 73.3103 3-month forward rate (RUB/$): 71.9055 U.S. dollar 3-month interest rate: 7.250% Russian ruble 3-month interest rate: 5.500%

a) Explain is it possible for Ana to make arbitrage profit based on the above rates. (Please show your reasoning and proof). If yes, explain what kind of arbitrage strategy Ana can use? [5 marks]

b) Show the detailed steps of the arbitrage strategy and calculate the arbitrage profit. Is this strategy risk free and why? [10 marks]

c) Suppose there is a fix income security carrying the same risk as the arbitrage strategy and the maturity is 90 days as well, with the annualized return of 5%. If Ana can investment the $5 million in that product as well, how should she choose between this two? [10 marks]

d) Suppose Ana can use 10 million EUR to make another arbitrage by using the following market rates. If she expects the exchange rate to stay very close to the spot rate, explain the possibility of arbitraging. (Please show your reasoning and proof). If yes, explain what kind of arbitrage can she perform this time?

Spot rate (RUB/): 86.81 90-day forward rate (RUB/): 86.50 Expected spot rate in 90 days (RUB/): 86.79 90-day EUR interest rate: 6.000% 5 BUSI4439-E1 BUSI4439-E1 90-day RUB interest rate: 4.600% [5 marks]

e) Show the detailed steps of the arbitrage strategy and calculate the arbitrage profit. Is this strategy risk free and why? (You may explain your answer with numerical examples) [15 marks]

f) If Ana is a very conservative investor and highly risk averse, explain which arbitrage of the above two she would prefer?

It is very urgent, thank you. no excel please