Daniel is both a trader and investor in East African Community. He has 1 million Kenya shillings that he wishes to apply as his capital. The macroeconomic variables of the three East African Community states were shown below:

Macroeconomic variables

KENYA

UGANDA

TANZANIA

Interest rates

9%

Inflation rates

7%

32 ugh/1KES

21tz/1KES

Exchange rates

The negotiated forward rates were 30UGH/1KES

Daniel wish to invest in Uganda for one year.

Determine whether there will be arbitrage or disarbitrage.

Suppose Daniel changes his mind and merely wish to receive triangular arbitrage.

The negotiated rate was 1.4UGH/ .1TZ

Establish Triangular Arbitrage.