The three-month dollar interest rate in New York is 6.40% per annum. Alternatively, the threemonth euro interest rate in Frankfort is 4.40% p.a. The current $/ spot exchange rate is $1.0840/. The curo three-month forward rate is quoted at $1.0980/. 1. Show how a U.S. arbitrageur would exploit a possible covered interest arbitrage opportunity with a nominal $60,000,000. Don't start with the formula. Explain in your own words and in detail the transactions (steps) the arbitrageur would execute with the calcillations for each step, and then calculate the profit/loss the arbitrager would make or face. 2. Use the Interest Rate Parity formula (IRP) to show whether the interest rate parity condition is violated. (make sure you use the correct relationship and pose the question correctly. You don't know the answer upfront, you can't claim equality until you check it. (refer to my examples). If violated, at what 3-month forward rate would it hold? 3. Use the International Fisher Effect (IFE) to find what should be the expected three-month spot exchange rate of dollars against the euro (If not performing chain calculations, use interest rates up to four decimal places, and again use the proper relationship that describes IIE)