Suppose the $5-$year interest rate on a dollardenominated pure discount bond is $4\mathrm{.}5\%$ p$.$a$.$ and the interest rate on a similar pure discount euro$-$denominated

Chapter $6$ Interest Rate Parity $203$

bond is $7\mathrm{.}5\%$ p$.$a$.$ If the current spot rate is $$1\mathrm{.}08>$:$,$

what forward exchange rate prevents covered interest arbitrage?