Assume that annual interest rates are 7 percent in the United States and 6 percent in Turkey. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.6667/Turkish lira (TL).
1. If the forward rate is $0.6735/TL, how could the bank arbitrage use a sum of $9 million? What is the spread earned? (Do not round intermediate calculations. Round your answer to 4 decimal places, (e.g., 32.1616))
2. At what forward rate is this arbitrage eliminated? (Do not round intermediate calculations. Round your answer to 5 decimal places, (e.g., 32.16161))