A U.S.-based currency dealer has good credit and can borrow $1,000,000 or 800,000 for one year. The one-year interest rate in the U.S. is i$= 2% and in the euro zone the one-year interest rate is i = 6%. The spot exchange rate is $1.25 = 1.00 and the one- year forward exchange rate is $1.20 1.00. Show how to realize a certain euro profit via covered interest arbitrage. Borrow $1,000,000 at 2%. Trade $1,000,000 for 800,000; invest at i = 6%; translate proceeds back at forward rate of $1.20 = 1.00, gross proceeds = $1,017,600. None of these. Borrow 800,000 at i = 6%; translate to dollars at the spot, invest in the U.S. at i$ = 2% for one year; translate all dollar back into euro at the forward rate of $1.20 = 1.00. Net profit 2,000. Borrow 800,000 at i = 6%; translate to dollars at the spot, invest in the U.S. at i$= 2% for one year; translate part of dollar back into euro at the forward rate of $1.20 - 1.00. Net profit $2,400.