Kenyan depositors money lost its buying power by an estimated 2.36 per cent in September, the lowest real interest rate on long-term savings since May 2017 as a spike in the cost of living ravaged investors. Data from the Central Bank of Kenya (CBK) shows that lenders paid an average gross interest rate of 6.83 percent on fixed deposit accounts However this was wiped out by the inflation rate of. Required i. What is the relationship among the real, nominal and inflation rates?

ii. How do you think the situation above is likely to affect the profitability of commercial banks in Kenya? (6 marks)

iii. What advice would you offer to an investor holding say Shs 50 million in a Kenya shilling denominated fixed deposit account? (6 marks)

b) Identify one recent major global event. Discuss how the event may affect global financial systems in general and the Kenyan economy in particular.