Assignment 6: Ch.6 International Parity Relations i Saved Help Save & Ex You received no credit for this question in the previous attempt. View previou 8 A currency dealer has good credit and can borrow either $1,000,000 or 800,000 for one year. The one-year interest rate in the U.S. is i$ = 2% and in the euro zone the one-year interest rate is 1 = 6%. The spot exchange rate is $1.25 = 1.00 and the one-year forward exchange rate is $1.20 = 1.00. Show how to realize a certain profit via covered interest arbitrage. eBook Multiple Choice Print Borrow $1,000,000 at 2%. Trade $1,000,000 for 800,000; invest at le = 6%; translate proceeds back at forward rate of $1.20 = 1.00, gross proceeds = $1,017,600. Borrow 800,000 at ip = 6%; translate to dollars at the spot, invest in the U.S. at is = 2% for one year, translate 848,000 back into euro at the forward rate of $1.20 = 1.00. Net profit $2,400. Borrow 800,000 at i = 6%; translate to dollars at the spot, invest in the U.S. at ig = 2% for one year, translate 850,000 back into euro at the forward rate of $1.20 = 1.00. Net profit 2,000. Borrow 800,000 at ip = 6%; translate to dollars at the spot, invest in the U.S. at is = 2% for one year, translate 848,000 back into euro at the forward rate of $1.20 = 1.00. Net profit is $2,400. Additionally, one may borrow 800,000 at ip = 6%; translate to dollars at the spot, invest in the U.S. at is = 2% for one year, translate 850,000 back into euro at the forward rate of $1.20 = 100. Net profit is 2,000