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 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	$	5,000,000
Spot rate (/$)		118.46
180-day forward rate (/$)		117.86
U.S. dollar annual interest rate		4.801	%
Japanese yen annual interest rate		3.396	%

The CIA profit potential is %,

which tells Takeshi Kamada that he should borrow