1 - Covered Interest Arbitrage. Assume the following information:

Quoted Price

Spot rate (/$) 118.60

180-day forward rate (/$) 117.80

1-year Japanese yen interest rate 3.40%

1-year US dollar interest rate 4.80%

Given this information, what would be the semiannual yield (percentage return) of a Tokyo investor who used covered interest arbitrage by investing in the U.S? (Assume the investor has /593,000,000 of arbitrage funds available) What would be the potential profit from doing coverage interest arbitrage?

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