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Covered Interest Arbitrage. Assume the following information: St = 1.19 in EURUSD Ft,90 = 1.18 in EURUSD iEUR = 1.50% iUSD = 0.5% T =

Covered Interest Arbitrage. Assume the following information:

St = 1.19 in EURUSD

Ft,90 = 1.18 in EURUSD

iEUR = 1.50%

iUSD = 0.5%

T = 90 days

Given this information, is covered interest arbitrage possible? (6 points) Design a covered arbitrage strategy and calculate its profits. (12 points)

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