Ayako Miyake is a currency arbitrager for Atsugi Bank in Kanagawa. The spot rate this morning is \(¥ 110.60 / \mathrm{S}\), and early indications are the 90 -day interest rates in the United States will rise from their current level of \(4.25 \%\) per annum. The U.S. Federal Reserve Bank, the central bank, is worried about an unjustified level of the U.S. stock market and has been publically considering raising interest rates 50 basis points ( \(\frac{1}{2} \%\) ). The 90 -day forward exchange rate quoted to Miyake-san by other Japanese banks are all about the same, \(¥ 109.80 / \$\). The current 90 -day yen interest rate is \(0.5 \%\) per annum. Miyake-san has \(¥ 400,000,000\) at her disposal.

a. How much profit can Miyake-san make through covered interest arbitrage?

b. What could Miyake-san do with her \(¥ 400\) million if she wished to speculate through uncovered interest arbitrage? How much profit could she expect to make?