James, a foreign exchange trader in US, can invest 8,000,000 USD, or the foreign currency equivalent of the bank's short-term funds, in a covered interest arbitrage with UK. Using the following quotes, answer the questions of parts a, b, and c.

Assumptions Value Arbitrage funds available 8,000,000 USD Spot exchange rate (GBP/$) 7.1720 3-month forward rate (GBP/$) 7.1980 US dollar 3-month interest rate 4.000% UK Pound 3-month interest rate 6.000%

a. Calculate the principal and interest gained from investing in US bank?

b. Calculate the principal and interest gained from investing in UK bank?

c. Can James make covered interest arbitrage (CIA) profit?