You are given the following table: Spot rate january 2024 - 162 kenyan shillings per dollar, forward rate december 2024 - 170 kenyan shillings per dollar, interest rates in kenya - 18%, interest rates in USA - 6%. Joe being a foreign portfolio investor wishes to invest $1million in kenya. At maturity, Joe will repatriate all his proceeds. Compute the covered interest arbitrage. Explain what has impacted Joe's investment. Draw the parity diagram to demonstrate the position of Joe

Answer rating: 100% (QA)

To compute the covered interest arbitrage and understand the impact on Joes investment we need to compare the returns he would earn from investing in ... View the full answer