Suppose that the current spot exchange rate is $1\mathrm{.}50$ per $$ and the one$-$year forward exchange rate is $1\mathrm{.}60$ per $.$ The one$-$year interest rate is $5\mathrm{.}4\%$ in euros and $5\mathrm{.}2\%$ in pounds. You can borrow at most $1,000,000$ or the equivalent pound amount, i$.$e$.,666,667,$ at the current spot exchange rate.

Required:

If you are a euro$-$based investor, how can you realize a guaranteed profit from covered interest arbitrage and the size of arbitrage profit?

How will the interest rate parity be restored as a result of the above transactions?

If you are a pound$-$based investor, what is the covered arbitrage process and the size of the arbitrage profit?