The 4-year interest rate for the US is 7% and it is 5% for Japan. The forward discount on the dollar is -3.5%. O A Covered Interest Arbitrage is possible. You should borrow yen and invest in dollars because the US yield differential versus Japan more than offsets the forward discount on the dollar. O A Covered Interest Arbitrage is possible. You should borrow dollars and invest in yen because the US yield differential versus Japan more than offsets the forward discount on the dollar. O A Covered Interest Arbitrage is possible. You should borrow dollars and invest in yen because the US yield differential versus Japan does not offset the forward discount on the dollar. O The question cannot be answered without knowing the spot and forward exchange rates