Question: Ms. Chambers a U.S. arbitrageur, is looking for arbitrage opportunities. The one-year interest rate offered in the U.S is 3% while the one year interest

Ms. Chambers a U.S. arbitrageur, is looking for arbitrage opportunities. The one-year interest rate offered in the U.S is 3% while the one year interest rate offered in Bolivia is 125. The spot rate is 7.29% BL/USD that is, Bolivian Pesos 7.30 per USD Ms. Chambers is offered a one year forward contract at 7.80 BOL/USD. Assume you have USD 500,000

Is Arbitrage possible?
If arbitrage is possible, design the appropriate covered arbitrage strategy.
If arbitrage is possible, calculate the profits for the arbitrage strategy.
At what forward rate there will be no arbitrage profit.

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