Assessing Whether IRP Exists

. Assume zero transactions costs. As of now, the Japanese one-year interest rate is 3 percent, and the U.S. one-year interest rate is 9 percent. The spot rate of the Japanese yen is $.0090 and the one-year forward rate of the Japanese yen is $.0097. Is covered interest arbitrage feasible for U.S. investors, for Japanese investors, for both types of investors, or for neither type of investor?

a. Feasible for U.S. investors

b. Feasible for Japanese investors

c. Feasible for both U.S. and Japanese investors

d. Feasible for neither U.S. nor Japanese investors