Question 41 pts Takeshi Kamada, Credit Suisse (Tokyo), observes that the /$ spot rate has been holding steady, and both dollar and yen interest rates have remained relatively fixed over the past week. Takeshi wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of Takeshi's research associates -- and their computer models -- are predicting the spot rate to remain close to 118.00/$ for the coming 180 days.

Assumptions Value Arbitrage funds available $5,000,000 Spot rate (/$) 118.17 180-day forward rate (/$) 116.93 Expected spot rate in 180 days (/$) 118.00 180-day U.S. dollar interest rate 4.800% 180-day Japanese yen interest rate 3.400% What is percentage profit from UIA (the carry trade) between Japan and the United States? Answer this question from the Japanese perspective.