Question: Please solve question three. Use the following information to answer the next two questions. As of today, the spot exchange rate is 1.6/$. The U.S.

Please solve question three. Use the following information to answer the next Please solve question three.

Use the following information to answer the next two questions. As of today, the spot exchange rate is 1.6/$. The U.S. interest rate is 4% and the interest rate in the euro zone is 8%. Calculate the one-year forward rate that should prevail according to IRP. (Assume the US is the home country and round intermediate steps to four decimals.) .60191.5408.64911.6616 QUESTION 3 Suppose that the one year forward rate is 1.2/$. Find the profit (in terms of percentage returns) you could earn via covered interest arbitrage. Round intermediate steps to four decimals. Enter your answer in decimal format. (EX: .XXXX)

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