A Polish currency dealer has good credit and can borrow either 1,600,000 or $2,000,000 for one year. The one-year interest rate in the U.S. is is = 6.25% and in the euro zone the one-year interest rate is ie = 2x The spot exchange rate is $120 = 100 and the one year forward exchange rate is $1.25 = 1.00. Show how you can realize a certain euro profit via covered interest arbitrage Multiple Choice Arbitrage opportunity does not exit Borrow $2,000,000 at 6.25%, trade $2,000,000 for C1,666,667 at the spot rate, invest euros at te - 2x; translate euro proceeds back to dollars at the forward rote of $125 = 1.00 for gross proceeds of $2125.000 Net profit will be 55.000 Borrow $2,000,000 at 6.25% trade $2,000,000 for 800,000 at the spot rate Invest euros ot ie - 2%, translate euro proceeds back to dollars at the forward rate of $1.20 100 Net profit will be $17,600