Question 2: You have been given the foreign exchange data for Kenya against US dollars as follows:

spot rate	bid	ask
market a	93	95
market b	94	96

The macroeconomic variables for Kenya and US at the time were:

	kenya	us
interest rate	12%	8%
inflation rate	8%	5%

Required: a) Compute mean rates for each of the markets,AandB. (5 Marks)

b) Compute the Bid/Ask spread for both markets,AandB. (5 Marks)

c) Using interest rate parity theorem, compute the exchange premium or discount. (5 Marks)

d) Determine the forward rates for each of the markets: (5 Marks)