Compute the forward rate premium of the tsh

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Reference no: EM132406577

Assume that the Tsh exhibits a 6 month interest rate of 18% per annum while Ksh exhibits a 6 month interest rate of 15% per annum.

Required

i. Compute the Forward rate premium of the Tsh with respect to Ksh according to interest rate parity.

ii. If the current spot rate of the Tsh is 0.06, compute the 6 month forward of the Tsh with respect to Kshs

iii. Compute the gain from covered interest arbitrage to a Kenya investor with Ksh 10 million for 6 months period.

Reference no: EM132406577

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