Suppose the spot and forward bid-ask rates for the South African rand/Ghana cedi (ZAR/GHS)

exchange rate at a particular today are as follows:

Period	ZAR/GHS Bid Rate	ZAR/GHS Ask Rate
Spot	3.0815	3.1817
1-month	3.0813	3.1818
6-months	3.0624	3.1630
12-months	3.0396	3.1404

i. Given the above information, determine the % bid-ask spread for all the maturities.

(4 marks)

ii. Briefly discuss the determinants of bid-ask spreads in foreign exchange markets, and explain why you would normally expect the percentage bidask spread on the forward rates to

increase with the maturity of the forward contract.

(8 marks)