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Show all your work, write your answers in your handwriting, and submit the homework class. The instructor does not accept typed answers. Suppose that the annual interest rate is 5 percent in the United States and 8 percent in South Korea, and that the spot exchange rate is USD0.0008/KRW and the forward exchange rate, with one-year maturity, is USD0.0007/KRW. Assume that you can borrow up to $1,000,000 1. (10 points) Show whether or not IRP is holding under current market conditions. 2. (15 points) Demonstrate how you can take advantage of an arbitrage opportunity, if any. Step 1: Step 2: Step 3: 3. (10 points) Compute any arbitrage profit (guaranteed profit), if any. 4. (15 points) Describe how arbitrage activities affect currency spot and forward markets and two countries' credit markets such that IRP holds