Suppose That the Annual Interest Rate Is 5

Multiple Choice

Suppose that the annual interest rate is 5.0 percent in the United States and 3.5 percent in Germany, and that the spot exchange rate is $1.12/€ and the forward exchange rate, with one-year maturity, is $1.16/€. Assume that an arbitrager can borrow up to $1,000,000 or €892,857 (which is the equivalent of $1,000,000 at the spot exchange rate of $1.12/€) .
-Covered interest arbitrage would not be possible if the forward rate would be:

A) $1.1093/€.
B) $1.1248/€.
C) $1.1362/€.
D) $1.1611/€.