7. Covered Interest Arbitrage on a 3-month horizon US interest rate = 12% Euro zone interest rate = 2% The current spot rate is $1.25/ The Futures rate is $1.30/ D D What's the best investment strategy for the arbitrageurs? Please list all steps Once the arbitrageurs around the globe execute their strategy, the following would happen US interest Rate- Increase (increase or Decrease) The Futures rate- Decrease (increase or Decrease)

7. Covered Interest Arbitrage on a 3-month horizon - US interest rate \=12 - Euro zone interest rate \=2 - The current spot rate is \\( \\$ 1.25 / \\) - The Futures rate is \\( \\$ 1.30 / \\) What's the best investment strategy for the arbitrageurs? Please list all steps Once the arbitrageurs around the globe execute their strategy, the following would happen - US interest Rate- Increase (increase or Decrease) - The Futures rate-Decrease (increase or Decrease)