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Kamada: CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is...

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Finance

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Kamada: CIA Japan (A). Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possiblities. 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 ClA profit possible? If so, how? The ClA profit potential is \%, which tells Takeshi Kamada that he should borrow and invest in the higher yielding currency, , to lock in a covered interest arbitrage (CIA) profit. (Round to three decimal places and select from the drop-down menus.) Takeshi Kamada generates a CIA profit of Y by investing in the interest rate currency, the and simultaneously selling the proceeds forward into at a forward premium which does not completely negate the interest differential. (Round to two decimal places and select from the drop-down menus.)

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