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 (/$)		118.60
180-day forward rate (/$)		117.80
U.S. dollar annual interest rate		4.800	%
Japanese yen annual interest rate		3.400	%

The CIA profit potential is ___%, which tells Takeshi Kamada that he should borrow (the Japanese yen/the US dollar) the U.S. dollar and invest in the higher yielding currency (the Japanese yen/the U.S.dollar) , to lock in a covered interest arbitrage (CIA) profit.