Suppose the spot price for Euro is $1.15, the futures price for delivery in 6 months is $1.1471286. Assume that the 6 month borrowing/lending rate in Euro is 0.75percent (annually, continuous compounding) and the corresponding rate in $ is 0.25percent (annually, continuous compounding).
(This is an FX application using the same cost of carry model).
a. Assume no transactions costs; do the above prices represent an arbitrage opportunity? Why?