The practice of investing in a currency that offers the higher return on a covered basis is known as covered interest arbitrage. Assume that the Eurodollar rate is 8% per annum, and that the Euroyen rate is 5% per annum. If the spot rate is \ 106/$ and the 180 days forward rate is 102.5/$, The interest rate difference is Forward premium is %. There is covered interest arbitrage opportunity, since the interest rate difference the forward premium. In order to enjoy covered interest arbitrage opportunity correct strategy is You should borrow and invest in The arbitrage amount you can enjoy if you can borrow upto 1 million US dollars or its equivalent yens is USD