Kamada: CIA Japan (A).Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest

$5,000,000 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. Is CIA profit possible? If so, how?

Arbitrage funds available	$	5,000,000
Spot rate (/$)		118.49
180-day forward rate (/$)		117.82
U.S. dollar annual interest rate		4.807	%
Japanese yen annual interest rate		3.391	%

The CIA profit potential is 0.481%, which tells Takeshi Kamada that he should borrow the ? and invest in the higher-yielding currency,? , to lock in a covered interest arbitrage (CIA) profit. (Round to three decimal places and select from the drop-down menus.)

Takeshi Kamada generates a CIA profit of ___?___yen. by investing in the (higher/lower) interest rate currency, the (dollar/ yen), and simultaneously selling the (dollar/yen) proceeds forward into (dollar/yen) at a forward premium which does not completely negate the interest differential. (Round to two decimal places and select from the drop-down menus.)