Kamada: CIA Japan​ (A). Takeshi​ Kamada, a foreign exchange trader at Credit Suisse​ (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest 4,900,000 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? Arbitrage funds available $4,900,000
Spot rate (¥/$) 118.42
180-day forward rate (¥/$) 117.87
U. S. dollar annual interest rate 4.807%
Japanese yen annual interest rate 3.393%

The CIA profit potential is −0.481​%, which tells Takeshi Kamada that he should borrow the Japanese yen and invest in the higher yielding​ currency, the U. S.dollar, 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 yen¥. by investing in the (higher/lower) interest rate​ currency, the (dollar/ yen​), and simultaneously selling the (dollar/yen) proceeds forward into (dollar/yen) 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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answer; sensory adaptation;

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.