We observe F0> So^e(rd-rf), where F0 is the direct forward exchange rate, rd is the domestic risk-free rate, rf is the foreign risk free rate, T is the maturity of the forward contract, So is the direct spot exchange rate. Choose an action from below to arbitrage:

At time 0, we convert the foreign currency we borrowed into domestic currency.

At time 0, borrow 1000 foreign currency at rf for T.

Long forward: buy the foreign currency at T at F0 using domestic currency received from the domestic bank.

At time 0, borrow 1000 domestic currency at rd for T.