Question
Misty, an American is a currency dealer, based in New York, has $ 400,000 that he wishes to invest in Kenya. The investment particulars are:
Misty, an American is a currency dealer, based in New York, has $ 400,000 that he wishes to invest in Kenya.
The investment particulars are:
|
| Kenya | USA |
| Interest rate | 10% p.a | 6% p.a |
| Spot rate | Kes. 109/H |
|
| Forward Rate | Ksh 110/ |
|
Required:
(a) Compute and explain the quantum covered interest arbitrage
(b) Explain how a portfolio investor would gain from covered interest arbitrage
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Dynamic Asset Allocation With Forwards And Futures
Authors: Abraham Lioui , Patrice Poncet
1st Edition
0387241078,038724106X
