In: ' Web now have a covered interest rate arbitrage Now, borrow dollars at 10%, change dollars into euros at 0.8000, lend euros out at 14%, buy a forward euro to dollar exchange contract at 0.8080 euro per dollar One year later, collect euros,change eruos into dollars, pay back dollars Prot=? " You prot from interest rates difference 14%-'l 0%=4% You suffer form euro depreciation (0.80000.8080)/0.8000=-1"/0