You have $1$ million and can trade at the following prices:

Spot rate, Japanese yen $()$ per euro $()100/$

One$-$year forward exchange rate $102/$

One$-$year euro interest rate $2\%$

One$-$year yen interest rate $3\%$

Required

Show how covered interest arbitrage can lock in an arbitrage profit.

$$ Use time lines to indicate the size and timing of each cash flow.

$$ Compute your profit based on an initial, time zero transaction of $100,000,000($Or $1$ million at the $100/$ spot exchange rate$).$

$$ Take your profit in time $1$ euros.

$$ Your answer should be accurate at least to the nearest $1.$