Suppose the 1-year borrowing rate in dollars is 1.5%. The 1-year lending rate in euros is 2.00%. The direct spot ask exchange rate is $1.16/. A trader can borrow up to $500,000. Please find the least expensive spot exchange rate $/ which should prevail in 1 year from now in order for a trader to cover his expenses.

Under what conditions will the trader make profit? Under what conditions will the trader make money.