A Germany-based currency dealer has good credit and can borrow $1,000,000 or its equivalence for one year. The 6-month interest rate in the U.S. is i\$ =6%p.a. and in the euro zone the 6-month interest rate is i=2% p.a.. The spot exchange rate is $1.25=1.00 and the 6 -month forward exchange rate is $1.28=1.00. Show how to realize a certain dollar profit via covered interest arbitrage. (I) Borrow 800,000 at 2% p.a.. Trade 800,000 for $1,000,000; invest at 6% p.a.; translate proceeds back at forward rate of $1.28=1.00, gross proceeds =12,125. (II) Borrow $1,000,000 at i\$ =6% p.a.; translate to euros at the spot, invest in the euro zone at i = 2\% p.a.; translate back to $1,060,000 at the forward rate of $1.28=1.00. Net profit 615.38. (III) Borrow $1,000,000 at i\$ =6% p.a.; translate to euros at the spot, invest in the euro zone at i =2% p.a.; translate back to $1,060,800 at the forward rate of $1.28=1.00. Net profit $800. Only (II) Only (III) None of the other answers Both (II) and (III) Only (1)