Problem 5 Takeshi Kamada - CIA (Covered Interest Arbitrage) Japan 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. He faced the following exchange rate and interest rate quotes. Is CIA profit possible? If so, how? Yen equivalent: 593,000,000 Arbitrage Rule of Thumb: If the difference in interest rates is greater than the forward premium/discount, or expected change in the spot rate for UIA, invest in the higher interest yielding currency. If the difference in interest rates is less than the forward premium (or expected change in the spot rate), invest in the lower yielding currency