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Suppose at current exchange rate $1.2 - 1.0 and UK is 5% and the one year interest rate in the US is 4.9%. (Assume that you can borrow or lend at these rates.) Which of the following is true This is an arbitrage opportunity. Do it right and you can make a profit of 0.1% on every dollar invested. This is an arbitrage opportunity. Do it right and you can make a profit of 4.9% on every dollar invested. This is an arbitrage opportunity. Do it right and you can make a profit of .05% on every dollar invested. Unless it is possible to lock in the exchange rate in one year there is no risk free arbitrage opportunity None of these Answers are correct