Suppose that the current spot exchange rate is

0.80

per

$

and the three-month forward exchange rate is

0.7813

per

$

. The thr month interest rate is 5.60 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to

$1,000,000

or

800,000

.\ Required:\ a. How will you realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. doll What will be the size of your arbitrage profit?\ b. Assume that you want to realize profit in terms of euros. Show the covered arbitrage process and determine the arbitrage pro euros. How will you realize a certain profit and size of your arbitrage profit?\ Complete this question by entering your answers in the tabs below.\ Required A\ How will you realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars? What will be the size of your arbitrage profit?\ Note: Do not round intermediate calculations. Round off the final answer to nearest whole dollar.\ \\\\table[[Profit via covered interest arbitrage,\\\\table[[Borrow in dollars and invest in euros. Hedge exchange rate risk by selling euros],[forward.]]],[Arbitrage profit,

vdots

Suppose that the current spot exchange rate is 0.80 per $ and the three-month forward exchange rate is 0.7813 per $. The thr month interest rate is 5.60 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to $1,000,000 or 800,000. Required: a. How will you realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. doll What will be the size of your arbitrage profit? b. Assume that you want to realize profit in terms of euros. Show the covered arbitrage process and determine the arbitrage pro euros. How will you realize a certain profit and size of your arbitrage profit? Complete this question by entering your answers in the tabs below. How will you realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars? What will be the size of your arbitrage profit? Note: Do not round intermediate calculations. Round off the final answer to nearest whole dollar