Suppose the domestic currency is the Kenya shilling and the foreign currency is the US...
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Finance
Suppose the domestic currency is the Kenya shilling and the foreign currency is the US Dollar. Let the spot exchange rate be sh85 per $, the Kenyan interest rate be 10% 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 six month contract
Show the arbitrage profit if the forward price is both high and low than the calculated.
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