The following exchange rate and interest rate quotations are observed for US$ and . Note: Bid interest rate is your lending rate (i.e., rate of investment return), while ask interest rate is your borrowing rate. Annual interest Annual interest Spot exchange One-year rate in rate in US$ forward rate exchange rate Bid 4.0% 6.0% US$1.37564 US$1.3676/ Ask 4.2% 6.2% US$1.3781/ US$1.3717/ Describe in detail the actions you need to take to profit from a risk-free arbitrage opportunity. Which currency and of what amount you want to borrow? Which currency and of what amount you want to invest in? What are the spot and forward foreign exchange transactions involved? Which forward contract you will need to enter into? What is the gross return from your investment? What is the amount you will need to repay? How much is the arbitrage profit in percentage of transaction amount? Give your answer to the nearest 0.01%. Show your calculations in arriving at the arbitrage profit. (formula sheet) The following exchange rate and interest rate quotations are observed for US$ and . Note: Bid interest rate is your lending rate (i.e., rate of investment return), while ask interest rate is your borrowing rate. Annual interest Annual interest Spot exchange One-year rate in rate in US$ forward rate exchange rate Bid 4.0% 6.0% US$1.37564 US$1.3676/ Ask 4.2% 6.2% US$1.3781/ US$1.3717/ Describe in detail the actions you need to take to profit from a risk-free arbitrage opportunity. Which currency and of what amount you want to borrow? Which currency and of what amount you want to invest in? What are the spot and forward foreign exchange transactions involved? Which forward contract you will need to enter into? What is the gross return from your investment? What is the amount you will need to repay? How much is the arbitrage profit in percentage of transaction amount? Give your answer to the nearest 0.01%. Show your calculations in arriving at the arbitrage profit. (formula sheet)