Question
A trader would like to enter a 9-month Kenya Shillings currency forward contract. The spot exchange rate is four Nigerian Naira per Kenya Shillings. The
A trader would like to enter a 9-month Kenya Shillings currency forward contract. The spot exchange rate is four Nigerian Naira per Kenya Shillings. The interest rates in Kenya and Nigeria are 10% and 18% respectively. Required (i) Calculate the price of the currency forward contract (ii)Suppose the quoted price forward rate is three Nigerian Naira per Kenya Shillings, demonstrate the arbitrage strategy.
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
12th edition
978-0324597714, 324597711, 324597703, 978-8131518571, 8131518574, 978-0324597707
