Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $1,000,000 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.

AssumptionsValue

Arbitrage funds available$1,000,000

Spot exchange rate (/$)104.00

1 year forward rate (/$)100.00

US dollar interest rate3%

Japanese Yen interest rate1%

Complete the following table to show how Takeshi can make CIA profitby borrowing _?_________( or $) and converting it to _?_________( or $).

AssumptionsValue

Arbitrage funds available$1,000,000

Spot exchange rate (/$)104.00

1 year forward rate (/$)100.00

US dollar interest rate3%

Japanese Yen interest rate1%

Complete the following table to show how Takeshi can make CIA profit by borrowing _?_________( or $) and converting it to _?_________( or $).