Question 2 Suppose that the current spot exchange rate is 1.50/ and the one-year forward exchange rate is 1.60/. 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., 666,667, at the current spot exchange rate. Assume that you are a euro-based investor. What is your arbitrage profit from covered interest arbitrage? 1 6 pts I

Suppose that the current spot exchange rate is 1.50/ and the one-year forward exchange rate is 1.60/. 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., 666,667, at the current spot exchange rate. Assume that you are a euro-based investor. What is your arbitrage profit from covered interest arbitrage? Suppose that the current spot exchange rate is 1.50/ and the one-year forward exchange rate is 1.60/. 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., 666,667, at the current spot exchange rate. Assume that you are a euro-based investor. What is your arbitrage profit from covered interest arbitrage? Using the question from \#2, how the interest rate parity may be restored as a result of the above arbitrage transactions? Answer with either rise or fall. a. Euro interest rate will b. Pound interest rate will c. Spot exchange rate (euros per pound) will d. Forward rate will