You have confirmed the following exchange rates of the US dollar in the Nairobi foreign exchange market

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You have confirmed the following exchange rates of the US dollar in the Nairobi foreign exchange market (Ksh/Ş):

spot rate= 94

forward rate = 95

You have also established the inflation rates in Kenya and USA at that time were 8% and 5% respectively

Required:

a) Compute the premium or discount based on the quote.

b) Compute the depreciation or appreciation of the American dollar.

c) Find out if the forward rate is consistent with the macroeconomic factors.

d) Recommend four policy decisions that Kenya could implement to improve the value of its currency in relation to the US dollar.

Related Book For answer-question

Advanced Accounting

ISBN: 978-0077431808

10th edition

Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik

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Posted Date: Apr 05, 2023 01:00 AM

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You have confirmed the following exchange rates of the US dollar in the Nairobi foreign exchange market

Question:

Expert Answer:

a The premium or discount based on the quote can be calculated using the formula Forward PremiumDiscount Forward Rate Spot Rate ... View the full answer

Advanced Accounting

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