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 $5,000,000 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?
Atrbitrage funds available $5,000,000
Spot rate (YEN/DOLLAR) 118.60
180-day forward rate (YEN/DOLLAR) 117.80
180-day U.S. dollar interest rate 4.800%
180-day Japanese yen interst rate 3.400%