Here are some prices in the international money markets: Spot rate = $1.46/ Forward rate (one year) = $1.49/ Interest rate (C) = 7% per year Interest rate ($) = 9% per year 1. Assuming no transaction costs or taxes exist, covered arbitrage profits exist in the above situation by and investing in borrowing euro, investing in euro country borrowing euro, investing in dollar country borrowing dollars, investing in dollar country borrowing dollars, investing in euro country Assuming no transaction costs or taxes exist, covered arbitrage profits are 2,500 euro per 1 million borrowed euro investment zero 250,000 euro per 1 million borrowed euro investments $2.500 per 1 million borrowed $ investment