Make sure you show all your work so I can give you partial credit.

Covered Interest Parity (CIP)

Suppose that the annual interest rate on Japanese yen is 7% and the annual interest rate on U.S. dollar is 9%, respectively. The spot rate is $ 142 and the 90-day forward rate is $ 139.

Does covered interest parity (CIP) hold? Why?

Assume you want to invest $1,000,000. Can you make arbitrage profit? Describe your strategy (where you would borrow and where you would invest) and quantify the arbitrage profit.