Suppose that the invester of GMO has an extra cash reserve of $700,000 to invest in Mexico. The expected inflation rate is 1.29% in US and 3.37% in Mexico. The expected interest rate is 1.49% per year...

Suppose that the invester of GMO has an extra cash reserve
of $700,000 to invest in Mexico. The expected inflation rate is 1.29% in US and 3.37% in Mexico. The expected interest rate is 1.49% per year in the United States and 6.47% per year in Mexico. Currently, the nominal spot exchange rate is 19.780 Pesos per dollar and the nominal one-year forward rate is 19.790 pesos per dollar. The future spot exchange rate is 19.680 Pesos per US $1. Assess how he can construct an arbitrage portfolio based on appropriate calculations.