Question: Suppose that the current spot exchange rate is 0.82 per $ and the three-month forward exchange rate is 0.8013 per S. The three-month interest rate

Suppose that the current spot exchange rate is 0.82 per $ and the three-month forward exchange rate is 0.8013 per S. The three-month interest rate is 5.60 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to $1000,000 or 820,000

Required:

b. Assume that you want to realize profit in terms of euros. Show the covered arbitrage process and determine the arbitrage profit in euros. How will you realize a certain profit and size of your arbitrage profit?

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