Suppose that the annual interest rate is 5.0 percent in the United States and 2.5 percent in Germany, and that the spot exchange rate is $1.12/ and the forward exchange rate, with one-year maturity, is $1.14/. Assume that an arbitrager can borrow up to $1,000,000 and he finds an arbitrage opportunity.

A)How would he profit via covered interest arbitrage?

B)What would be his net cash flow or profit in one year?