James Zhang, a foreign exchange trader at J. P. Morgan Chase, can borrow $800,000, or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. Spot exchange rate: JPY124/USD Six-month forward exchange rate: JPY123/USD 180-day USD interest rate: 1.5%180-day JPY interest rate: 0.5% Assume that there is no transaction cost. Explain the specific steps James must take and calculate the profit in USD from the covered interest arbitrage. 1) Calculation 2) Conclusion 3) Transactions at time =0 4) Transactions at time =T 5) Profit in USD