Questions 40-42 are based on the following information: Suppose you observe the following exchange rates: S($/) = 1.25. The six-month forward rate is F6-m($/) = 1.26. The annual risk-free interest rate in the U.S. is 5% and in Germany it is 2%. You can borrow either $1,000,000 or 800,000. Briefly and clearly explain your arbitrage strategy. Show your work in each step to receive partial credits. HTML Editora U AA TE x : N x C TT 12pt Paragraph Questions 40-42 are based on the following information: Suppose you observe the following exchange rates: S($/) = 1.25. The six-month forward rate is F6-m($/) = 1.26. The annual risk-free interest rate in the U.S. is 5% and in Germany it is 2%. You can borrow either $1,000,000 or 800,000. Briefly and clearly explain your arbitrage strategy. Show your work in each step to receive partial credits. HTML Editora U AA TE x : N x C TT 12pt Paragraph