Question 1

You are the fund manager of ABC Fund, based in New York. You noticed that the Egyptian T-Bills are offering one of the most competitive interest rates worldwide, and you perceived it as a lucrative investment opportunity. On 1^st June 2021 your fund decided to invest in the Egyptian treasury bills that pays 14.4% annually and for this you transferred USD 1 million to Egypt. Money was converted in a bank which quoted a USD/EGP rate of 15.75/15.80.

On 1^st June 2022, T-Bills matured and interest was recognized. USD/EGP on 1^st June 2022 quotation was 18.70/18.77

Calculate in US$ terms the net profit / loss ABC Fund made on its investment in Egypt. (show all steps)

Now that the T-bills matured and ABC has their money in EGP, do you advice ABC fund to continue investing in the EGP at a T-bill rate of 17%, or convert their money into dollars and take it back home? Noting that the interest rate on USD deposits is 3%. (Justify your answer)