(b) Suppose that the current spot exchange rate is EUR1.50/GBP and the one-year forward exchange rate is EUR1.60/GBP. The one-year interest rate is 5.4% in euros and 5.2% in pounds. You can borrow at most 1,000,000 or the equivalent pound amount, i.e., GBP666,667, at the current spot exchange rate. (i) Show how you can realise a guaranteed profit from covered interest arbitrage. Assume that you are a euro-based investor. Determine the size of the arbitrage profit. (12 marks)