Suppose the domestic currency is the Kenya shilling and the foreign currency is the US Dollar. Let
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Question:
Suppose the domestic currency is the Kenya shilling and the foreign currency is the US Dollar. Let the spot exchange rate be sh140 per $, the Kenyan interest rate be 14% and the US interest rate be 4%. These rates are continuously compounded and assumed to be fixed over the life of the contract. Calculate the forward price of a nine month contract Show the arbitrage profit if the forward price is both high and low than the calculated.
Related Book For
International Economics Theory and Policy
ISBN: 978-0134519579
11th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz
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