Suppose that the annual interest rate is 5.0% in the United States and 3.4% in Germany, and that the spot exchange rate is $1.13 / € and the forward exchange rate, with one-year maturity, is $1.17 / €. Assume that an arbitrageur can borrow up to $1,000,000. If an astute trader finds an arbitrage, what would be the net cash flow in one year after paying the interest expenses? A. $21,363.24 B. $34,623.35
C. $70,601.77 D. $20,601.77
