Suppose the interest rate on the $$ is $15\%$ in London, and the interest on a comparable Tanzania in Dar es Salaam is $10\%.$ The spot rate is Tshs$\mathrm{.}1,750$ and the one year forward rate is Tshs$\mathrm{.}1,680.$

Required:

a$.$ Are there opportunities for covered interest arbitrage? Show relevant computations.

b$.$ Is there interest differential in favor of London or Dar es Salaam?

c$.$ Illustrate the profits associated with covered interest arbitrage by showing the steps that a Tanzania arbitrageur can take to profit from discrepancy in rates. Assume that the borrowing and lending rates are identical and the bid$-$ask spread in the spot and forward market is zero