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c) The current exchange rate between Tanzanian shilling and Kenyan shilling is 20 Tsh/Kshs. The exchange rate is expected to be 25 Tsh/Kshs one years

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c) The current exchange rate between Tanzanian shilling and Kenyan shilling is 20 Tsh/Kshs. The exchange rate is expected to be 25 Tsh/Kshs one years from now i. Calculate appreciation/depreciation of Tanzanian shillings in one year's time (3 Marks) ii. If interest rates in Tanzania and Kenya are at 15% and 12% respectively, is there any chance of interest rate arbitrage? Show how a Tanzania investor can benefit out of it (03 Marks) iii. If the market also provide spot exchange rate of Tanzanian shilling and Kenyan shilling as 2000 Tsh/USD and 80Ksh/USD respectively, is there any currency arbitrage opportunity? Show how a Tanzanian investor with Tshs 1,000,000 can benefit out of it (03 Marks)

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