Suppose that the current spot exchange rate of the pound () is 1.50 and the two-month forward exchange rate of the pound () is 1.55. The one-year interest rate is 4.9% in euros and 4.2% in pounds. Your borrowing capacity is for two months, at most 1,000,000 or the equivalent pound amount, i.e., 666,666.67, at the current spot exchange rate.

1. Is covered interest arbitrage feasible in this example? Show your work and explain

2. Show how you can realize a guaranteed profit from covered interest arbitrage. Assume that you are a euro-based investor. Also determine the size of the arbitrage profit.