The previous scenario assumed that the spot rates of the pound and the euro remained constant. However, there is a risk that the exchange rates change. Suppose that the euro appreciates over the course of the month, such that the cross exchange rate is now $0\mathrm{.}78125$ euros per pound. Assume the spot rate for the pound remains constant at $$1\mathrm{.}00$ per pound

Under this new cross exchange rate of $0\mathrm{.}78125,$ the $603,000$ euros that California Co$.$ needs to repay is equivalent to

pounds. Thus, after repaying the loan, California Co$.$ will have

pounds from the $693,600$ pounds they received from the initial investments. These pounds are equivalent to $-$$$78,240\mathrm{.}00,$ and represents a profit of $

over the initial $$200,000$ that California Co$.$ used from their own funds.