The following exchange rates were observed in Dar es Salaam on 30^th October 2011

TZS/US $ TZS/

Spot 1,450 1,510 2,550 2,670

One year forward 1,550 1,570 2,675 2,700

Further, it is assumed that cross rate quotations for US $ and are available.

Required:

1. With supporting computations, indicate whether the is trading at a forward discount or premium relative to the US $. Use mid-prices to determine the one year forward premium or discount on the relative to the US $
2. Suppose you have to purchase US $ 10,000 one year forward. What will be the cost of this transaction in ?
3. Compute the percentage bid - ask spread on the spot