Type or paste question here

2 3 Pretending that today is Dec-15-2021. 4 5 As of today Dec-15-2021, the spot market and futures market for "Euro vs. US$" are quoted as follows: 6 7 Spot Price for Euro: 1.3261$/ 8 9 Futures Price for Euro (with maturity Sep-26-2022): 1.3257$/ 10 11 Futures Price for Euro (with maturity Mar-29-2024): 1.3285$/ 12 13 Euro currency savings deposit interest rate: 1.60% APR 14 15 "Risk-free" 13-week US Treasury bill yield: 1.36% APR 16 17 (Notes: Physical commodities provide no income flow for its owners, whereas stocks pay dividend yields, bonds pay coupon-based current yields, 18 and foreign currencies pay savings account-deposit interest rate to those who own/hold/long them.) 19 20 21 22 Question A: (15 pts) 23 Apply the Spot-Futures Parity Theorem, to compute the fair value of the Sep-26-2022 Euro futures. 24 Is this Sep-26-2022 Euro futures contract overpriced or underpriced? By how much amount? (To be as accurate as at least 4 decimal places) 25 To design an arbitrage and capture the mispricing amount as profit, what transaction steps should be taken? Prove your design is "zero net investment, zero risk, positive gain". 2 3 Pretending that today is Dec-15-2021. 4 5 As of today Dec-15-2021, the spot market and futures market for "Euro vs. US$" are quoted as follows: 6 7 Spot Price for Euro: 1.3261$/ 8 9 Futures Price for Euro (with maturity Sep-26-2022): 1.3257$/ 10 11 Futures Price for Euro (with maturity Mar-29-2024): 1.3285$/ 12 13 Euro currency savings deposit interest rate: 1.60% APR 14 15 "Risk-free" 13-week US Treasury bill yield: 1.36% APR 16 17 (Notes: Physical commodities provide no income flow for its owners, whereas stocks pay dividend yields, bonds pay coupon-based current yields, 18 and foreign currencies pay savings account-deposit interest rate to those who own/hold/long them.) 19 20 21 22 Question A: (15 pts) 23 Apply the Spot-Futures Parity Theorem, to compute the fair value of the Sep-26-2022 Euro futures. 24 Is this Sep-26-2022 Euro futures contract overpriced or underpriced? By how much amount? (To be as accurate as at least 4 decimal places) 25 To design an arbitrage and capture the mispricing amount as profit, what transaction steps should be taken? Prove your design is "zero net investment, zero risk, positive gain