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Mr. A, a Foreign Exchange trader at XYZ Bank, has $1 million to trade with and the following information: the current spot exchange rate is

image text in transcribed Mr. A, a Foreign Exchange trader at XYZ Bank, has $1 million to trade with and the following information: the current spot exchange rate is Yen116.00/\$; the 180-day forward rate is Yen113.5/\$; the Euro-dollar rate is 8.00% per annum; the Euro-yen rate is 4.00% per annum. Is there a chance for Covered Interest Arbitrage? If yes, how much is the profit? (5M)

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