Suppose that you can borrow or lend for one year at 5% in the U.S. in $US and you can borrow or lend for one year in Japan in yen at 10%.You see in the newspaper that the spot exchange rate is $1 = 100 yen and the one-year forward exchange rate is $1 = 108 yen.Are there riskless profits to be made?What transactions would you undertake to make such profits?If everyone made such transactions what would happened to interest rates and the spot and forward exchange rates?Give one possible set of values for the interest rates and exchange rates that would result from these transactions for which there would be no riskless profits and which would be consistent with the changes you predict.