Takeshi$$ Kamada, a foreign exchange trader at Credit Suisse$($Tokyo$),$ is exploring covered interest arbitrage possibilities. He wants to invest $$$$5$ comma $050$ comma $0005,050,000$ or its yen$$ equivalent, in a covered interest arbitrage between U$.$S$.$ dollars and Japanese yen. He faced the following exchange rate and interest rate quotes. Is CIA profit$$ possible? If$$ so$,$ how?

Arbitrage funds available

$

$5,050,000$

Spot rate $(/$$$)$

$118\mathrm{.}48$

$180-$day forward rate $(/$$$)$

$117\mathrm{.}85$

U$.$S$.$ dollar annual interest rate

$4\mathrm{.}806$

$\%$

Japanese yen annual interest rate

$3\mathrm{.}391$

$\%$

Question content area bottom

Part $1$

The CIA profit potential is enter your response here$\%,$ which tells Takeshi Kamada that he should borrow

$$

the Japanese yen

the U$.$S$.$ dollar

and invest in the higher yielding$$ currency,

$$

the Japanese yen

the U$.$S$.$dollar

$,$ to lock in a covered interest arbitrage$($CIA$)$ profit.$($Round to three decimal places and select from the$$ drop$-$down menus.$)$