How the markets are likely to respond to the transactions

Question

Quotes for the us dollar (US$)and Thai Baht(Bt) are as follow:

Spot contract midpoint                        S₀^Bt/US$=Bt 24.96/US$
1-year forward midpoint                      F₀^Bt/US$=Bt25.64?US$
1-year Eurodollar interest rate              I^$=6.125%per year

a) Your newspaper does not quote 1-year Eurocurrency interest rates on thai baht. Make your own estimate of i^Bt.

b) Suppose that you can trade at the prices for S₀^Bt/US$ , F₀^Bt/US$ and I^$ just given and that you can also either borrow or lend at a Eurocurrency interest rate of i^Bt = 10% per cent. Based on a $1 million initial amount, how much profit can you generate through covered interest arbitrage ?

c) Outline and explain how the markets are likely to respond to the transactions you propose.