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Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $3226939 or its yen equivalent,
Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $3226939 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: Spot rate (=$1.00) 118.60 180-day forward rate (=$1.00) 117.80 180-day U.S. dollar interest rate 4.800% 180-day Japanese yen interest rate 3.400% How much can he make in profit? Round to the nearest dollar/yen.
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