Assume you notice the following information. Assume you spend $1 million USD to create an arbitrage trading strategy. What is your profit is USD. Remember to consider the profit after you pay back your loan
Spot (CAD/USD)=1.50
1 Year Forward (CAD/USD) = 1.60
1 Year Canadian interest rate of 8% in Canadian Dollars (CAD)
1 Year US interest rate of 4% in US Dollars (USD)