Two mortgage options are available: a 15 -year fixed-rate loan at 6% with no discount points, and a 15 year fixed-rate loan at 5.75% with 1 discount point. Assuming you will not pay off the loan early, which alternative is best for you? Assume it is a $100,000 mortgage. (5 marks) b) Consider the following information Spot rate =2 Euro /$ RUS=10% Forward rate one period ahead =1.8 Euro /$ RE=5% Show through your workings, your arbitrage profit if you start with US\$100. (5 marks) c) If, on an average, the yield curves were flat, what would this say about the liquidity premiums in the term structure? Would you be more or less willing to accept the pure expectations theory