Question $2($a$)$ Jacy is a foreign exchange dealer in a bank in London. She has $1,000,000($GBP$)$ for a short$-$ term money market investment and is contemplating whether she should invest in British pounds $($GBP$)$ or make a covered interest arbitrage investment in U$.$S$.$ dollars $($USD$).$ Below are the prevailing rates: Current value of USD$$ : GBP$0\mathrm{.}78156-$month forward rate of USD$$ : GBP$0\mathrm{.}7620$ US interest rate$$ : $3\%$ per annum British interest rate$$ : $2\%$ per annum Required: Assuming that no transaction costs or taxes exist, which currency would you recommend Jacy to invest in$?$ Support your answer with relevant calculations, including the arbitrage profit$/$loss in British pound.$(12$ marks$)($b$)$If interest rate parity $($IRP$)$ exists, then covered interest arbitrage $($CIA$)$ is not feasible.$$ Do you agree with the statement above? Justify your answer.$(6$ marks$)($c$)$ Explain the use of currency forward contracts in covered interest arbitrage.$(2$ marks$)[$Total: $20$ marks$]$