The three-month interest rate in the US is 6% per annum. The corresponding interest rate in Japan is 4% per annum. The spot exchange rate is Y109.56/$. The three-month forward rate is Y108.25/$. The three-month forward rate is Y108.25/$. If you have $1,000,000 to invest, where are you better-off investing - the US or Japan? What is your arbitrage profits?

Part B) At what three-month forward exchange rate is arbitrage eliminated?