Question: Problem 3 (Hull's 10th Ed., 1.25): Assume a zero interest rate and assume a $ exchange rates with spot of 1.558 (i.e., 1 pound costs

Problem 3 (Hull's 10th Ed., 1.25): Assume a zero interest rate

Problem 3 (Hull's 10th Ed., 1.25): Assume a zero interest rate and assume a $ exchange rates with spot of 1.558 (i.e., 1 pound costs 1.558 dollars (\$) at time t=0 ), 90-day forward 1.5556, and 180-day forward 1.5518. Construct arbitrage in each of the following two situations: (a) A 180-day European call option to buy 1 for $1.52 costs 0.02$. (b) A 90-day European put option to sell 1 for $1.59 costs 0.02$

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