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Suppose that the six-month interest rate in the United Kingdom is 0.5% per annum the sixmonth interest rate in Germany is 1.2% per annum. If

Suppose that the six-month interest rate in the United Kingdom is 0.5% per annum the sixmonth interest rate in Germany is 1.2% per annum. If the spot exchange rate is GBP/EUR 1.1286 and the six-month forward exchange rate is GBP/EUR 1.1312. Assume that the arbitrager can borrow up to EUR 1,000,000 or the equivalent GBP amount, at the spot rate. Can the arbitrager make a covered interest arbitrage (CIA) profit, justify your answer?

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