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The one-year, risk-free interest rate in the US is 14%. The interest rate for similar instruments in the Eurozone is 6%. The spot exchange rate

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The one-year, risk-free interest rate in the US is 14%. The interest rate for similar instruments in the Eurozone is 6%. The spot exchange rate is EUR0.80-USD1; the one-year forward rate is EURO.75-USD1. a. Show the above graphically. b. Is there an opportunity for arbitrage? Which market is currently "favored?" Why? c. Given the current relationships between spot rates, forward rates, and interest rates in the 2. two markets, what adjustments will take place? Explain

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