Suppose that the current spot exchange rate is 60.830/s and the three-month forward exchange rate is €0.815/S. The three-month interest rate is 6.00 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to $1,000,000 or 6830,000. Show how to realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars. Also determine the size of your arbitrage profit

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A:

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A: To analyze both the choices, the most effective way is gauge the genuine trade rates.