Kamada: CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,100,000 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? Note: From the table information, interest rates for both currencies are annual rates. They should be interpreted as 180-day U.S. dollar interest rate : X\% "per annum" and 180-day Japanese yen interest rate : Y\% "per annum." \begin{tabular}{lr} \hline Arbitrage funds available & $5,100,000 \\ Spot rate (=$1.00) & 118.43 \\ 180-day forward rate (=$1.00) & 117.87 \\ 180-day U.S. dollar interest rate & 4.806% \\ 180-day Japanese yen interest rate & 3.391% \\ \hline \end{tabular} The CIA profit potential is \%, which tells Takeshi Kamada that he should borrow 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 by investing in the interest rate currency, the and simultaneously selling the proceeds forward into a forward premium which does not completely negate the interest differential. (Round to two decimal places and select from the drop-down menus.)