One-year interbank interest rate	Exchange rates today	Expected exchange rates in one year
Euros (EUR)	6.00%	1.2175 USD 1.0000 EUR	1.2400 USD 1.0000 EUR
Mexican pesos (MXN)	5.00%	0.0501 USD 1.0000 MXN	0.0480 USD 1.000 MXN
Note: 1. Packer Bank is extremely confident on the expected exchange rates in one year. 2. Packer Bank can borrow and lend at the one-year interbank interest rates. 3. Packer Bank is limited to borrowing one million units of either euros or pesos.

-Assume the expected exchange rates in one year are correct. Packer Bank borrows one million pesos in Mexico for one year. Packer immediately converts the pesos to euros and lends out the euros in Europe for one year. What will be their profit in U.S. dollars at the end of the year?

-Assume the expected exchange rates in one year are correct. Explain whether Packer should: (i) borrow one million euros in Europe and lend the funds in Mexico or (ii) borrow one million pesos in Mexico and lend the funds in Europe.