Takeshi Kamada-CIA Japan (A).Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5 comma 000 comma 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 (/$) 118.60 180-day forward rate (/$) 117.80 U.S. dollar annual interest rate 4.800 % Japanese yen annual interest rate 3.400 % The CIA profit potential is negative 0.042%, which tells Takeshi Kamada that he should borrow the Japanese yen and invest in the higher yielding currency, 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.) Takeshi Kamada generates a CIA profit of yen 55,000.00 by investing in the higher interest rate currency, the dollar , and simultaneously selling the dollar proceeds forward into yen at a forward premium which does not completely negate the interest differential.