Suppose that the market condition is summarized as follow:

Three-month interest rate in United States: 8.0% per annum

Three-month interest rate in Germany: 5.0% per annum

Current sport exchange rate: €1.0114/$

Three-month forward exchange rate: €1.0101/$



Using the above quotes and assuming that you can borrow up to $1,000,000 or £666,667 show how you can do a covered interest arbitrage (CIA) and the amount profit made or loss incurred. [Calculate both profit and losses]