Suppose that the one year forward rate is €1.2/$. .As of today, the spot exchange rate is €1.6/$. The U.S. interest rate is 4% and the interest rate in the euro zone is 8% .
Assume the US is the home country Round intermediate steps to four decimals.
Enter your answer in decimal format. (EX: .XXXX).Find the profit (in terms of percentage returns) you could earn via covered interest arbitrage.