According to compound interest, this 1 Australian dollar will become (1+5%) 2 in two years.

This $0.62 became 0.62 * (1+7%) 2 two years later.

Two years later, the exchange rate was 0.62 * (1+7%) 2, and the ratio with (1+5%) 2 was 0.64384399 USD/AUD.

That is, the forward exchange rate is 0.64384399 USD/AUD.

1. If the 2-year forward exchange rate is 0.63, please do the following:

Conclude a forward contract of 0.63 and sell it in the spot market two years later. Every 1 Australian dollar, the net profit is (0.6484399-0.63), and the total arbitrage is determined by the number of forward shares.

2. If the 2-year forward exchange rate is 0.66, you can reverse the operation, sell the forward and buy the spot in the spot market two years later.