1. Suppose the interest rates in South Africa in year 2016 were 6.25% and those in Kenya were 11.5% while the spot exchange rate between the 2 countries was Ksh.7.50/ SA Rand. An investor had SA Rand 1 million to invest over a 6 months period and wanted to exploit the difference in the interest rates between the 2 countries

Required: advice the investor on the strategy to employ and the amount of profits to be generated at minimal risk (4 marks)

2. Suppose the spot exchange rates in June 2016 in bank A were as follows: Ush/Ksh 33.25, Tsh/Ksh.21.75 in bank B the spot rate was Ush/Tsh.1.4 and an investor had Ush.10 million

Required: advice the investor on the strategy to employ and the amount of profits to be generated at minimal risk