3. Covered Interest Arbitrage Bill Gillespie, an arbitrager with Bank of Auckland, faces the following New Zealand dollar/U.S. dollar quotes:

Spot rate NZ$1.4393/$

Six-month forward rate NZ$1.4637/$

Six-month New Zealand dollar interest rate 8.00% per annum

Six-month U.S. dollar interest rate 5.50% per annum

Bill is authorized to use NZ $20,000,000 or its U.S. dollar equivalent. Transaction costs would be $2700 paid at the end of six months. The ending profit, if any, should be realized in New Zealand dollars. Assuming Bill can borrow or invest at the above interest rates, how can he complete a covered interest arbitrage? What will be his profit?