Takeshi Kamada—CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,000,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes. Is CIA profit possible? If so, how?

Arbitrage funds available $5,000,000 Spot rate (¥/$) 118.60 180-day forward rate (¥/$) 117.80 180-day U.S. dollar interest rate 4.800%

180-day Japanese yen interest rate 3.400%