A foreign exchange dealer provided the following quotations for the South-African Rand (SAR) against the Tanzanian shilling (TZS) on the 31st September 2004:

TZS/SAR Spot 50 55

Three Months Forward2 7 dis.

Required:

(i)Calculate the percentage bid-ask spread on the three month forward TZS (2.5 Marks)

(ii)Calculate the profit made by the dealer in purchasing and selling SAR1,000,000 three month forward. (2.5 Marks)

(iii) Using the spot and forward offer prices calculate the forward premium/discount on the