3 In this problem you will derive the forward price Fo of a forward contract on one unit of a foreign currency. (We will use the continuous compounding convention.) To derive the forward price, let a $C(0) be the price today of one unit of that foreign currency (e.g. one euro); b ry be the applicable yearly interest rate in the USA; and c rp be the applicable yearly interest rate in that foreign country: and consider the following two investments: A Invest C(O) dollars in the US at the rate ry for time T; B Buy today one unit of the foreign currency for C(0) dollars and invest it (in the foreign country) at the rate rp for time T, and also take a short position in (that is, sell) e":T units of the foreign currency. Investments A and B have the same initial outlay so, to avoid an arbi- trage, they must also have the same final value. From that, derive Fo. Note. This is all you have to do: (1) Write the equation that expresses the fact that the final values of the two investments are the same; that equation involves Fo;. (2) Solve for Fo. 3 In this problem you will derive the forward price Fo of a forward contract on one unit of a foreign currency. (We will use the continuous compounding convention.) To derive the forward price, let a $C(0) be the price today of one unit of that foreign currency (e.g. one euro); b ry be the applicable yearly interest rate in the USA; and c rp be the applicable yearly interest rate in that foreign country: and consider the following two investments: A Invest C(O) dollars in the US at the rate ry for time T; B Buy today one unit of the foreign currency for C(0) dollars and invest it (in the foreign country) at the rate rp for time T, and also take a short position in (that is, sell) e":T units of the foreign currency. Investments A and B have the same initial outlay so, to avoid an arbi- trage, they must also have the same final value. From that, derive Fo. Note. This is all you have to do: (1) Write the equation that expresses the fact that the final values of the two investments are the same; that equation involves Fo;. (2) Solve for Fo