Question: The continuously compounded LIBOR is 6.5% per annum for US dollar and 5.5% per annum for Euro. The dollar per euro spot rate is 0.950$/. Suppose a bank sold a 100 million Euro forward contract with maturity one year at the forward rate 0.970 $/. Which of the following strategy can help the bank lock in an arbitrage profit at date zero?

This is the correct multiple choice answer: Borrow 90.8955M US dollar loan at time zero, use 89.9161 M of them to convert into 94.6485 M Euro at time zero and invest in an Euro account to earn Euro interest rate.

Can you please draw a one year timeline showing all the cashflows showing arbitrage profit at time 0?