Use the following information to answer the next two questions. An investment banker in Spain notices that 1 year interest rates in Spain and Mexico are 8% and 12%, respectively. Current spot rates are as follows: 1.02/$, $.15/MP The one year forward rate is .18/MP and the expected spot rate one year from now is .14/MP.

a) What should the forward premium be for IRP to hold?

A).037

B)-.0357

C).04

D)-.04

b) Assuming that the banker has access to one million euros, find her covered interest arbitrage profit (in euros). Round immediate steps to four decimals.

A)0

B)38,600

C)197,700

D)237,000