1. The 3-year US dollar interest rate is 3% and the 3-year Russian ruble interest rate is 8%. The spot exchange rate is RUB25/$ and the 3-year forward exchange rate is RUB30/$.

   1. A covered interest arbitrage opportunity exists: borrow dollars

   2. Borrow rubles because the ruble is at a forward discount

   3. A covered interest arbitrage opportunity exists: borrow rubles

   4. Borrow dollars because US interest rates are lower.