Suppose you observe that 90-day Interest rate across the eurozone, s 7%, while the interest rate in the U.S. over the same time period is 3%. Further, the spot rate and the 90-day forward rate on the euro are both $1.25. You have $400,000 that you wish to use in order to engage in covered interest arbitrage If many individuals recognize the same arbitrage opportunity, and sell euros forward just you did, this would place the forward rate. This would continue until the on the forward rate (relative to the current spot rate) pressure on ately upward downward 2% 4% er the same time period is 5% 3% 1% on P continue until the premium discount