Akira Numata, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $1,000,000 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:

Assumptions Value Yen Equivalent

Arbitrage funds available $1,000,000 118,600,000

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%

Identify the Covered Interest Arbitrage opportunity and lay out the arbitrage strategy