A foreign exchange trader at Triorgan Crate $($US$),$ can invest $ $1$ million or the foreign currency equivalent of the banks short term funds in a covered interest arbitrage with Japan. Using the following quotes answer the questions below.

Spot exchange rate $106$ yens over dollars

six month forward weighed $103\mathrm{.}5$ yens over dollars.

US dollar in three months interest rate $8\%$ per year

Japan three months interest rate $4\%$ per year

A$.$ Should this investor enter into a cover arbitrage investment? If so$,$ calculate the prophet difference on compare alternative investment $.$ Explain.

B$.$ Given your answer, in part, a calculate profits, or loses on the overall return of the CAI transaction.

C$.$ Calculate the forward, premium or discount of the Japanese Jen those your answer affirms $,$ the interest party theory explain