Question: Please show me how you do it. Thank You! 2) The spot USDEUR exchange rate is 0.8882 (each dollar buys 0.8882 Euro's), and the spot

Please show me how you do it. Thank You! 2) The

Please show me how you do it. Thank You!

2) The spot USDEUR exchange rate is 0.8882 (each dollar buys 0.8882 Euro's), and the spot USDCHF exchange rate is 0.9211 ( each dollar buys 0.9211 Swiss Franks). a) What is the EURCHF exchange rate that prevents any sort of arbitrage of the spot exchange rate? b) Suppose the 3 month USD continuously compounded interest rate is 1% (0.01 per year for 0.25 years) and the comparable EUR continuously compounded interest rate is 0.5% (0.005 per year for 0.25 years) what USDEUR exchange rate is consistent with maintaining parity? c) If the 3 month forward USDEUR exchange rate is 0.9100 instead of the one you calculated in b above what is the strategy to make a riskless profit ( assume you can borrow or lend money at the quoted interest rates in part b)

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