1. What is international currency arbitrage all about? Consider the following data:

UK 90-day interest rate = .07

Europe 90 day interest rate = .048

1.00 = 1.200, F₉₀ = 1.1765

You work for PNB Paribas in France. From a French point of view, is covered interest arbitrage available? If not, why not? If so, employ 10,000,000 and show how you would exploit the opportunity? Explain how the act of exploiting the arbitrage opportunity eliminates it. 

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