Rate between usd and ghs be quoted to avoid arbitrage

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Reference no: EM132070885

a) The exchange rate between the Ghana cedi (GHS) and the United States Dollar (USD) on Friday 24th June 2017 is 1 USD to 4.4450. The 6months interest rate for GHS is 12.9% whilst that of USD is 1.78%. How should the 6 months rate between USD and GHS be quoted to avoid arbitrage?

b) A company expects to pay USD 1m in 6months time for goods it is importing from China and is looking to hedge its exchange rate risk. Is it prudent for the company to buy USD 6months forward? Advice the company.

c) The Treasurer of this company has heard that a new bank that has opened in Ghana offers Risk management products that can help him hedge its foreign exchange rate risk. He however lacks understanding and has contacted you for advice. Explain three derivative products he can use to hedge its foreign exchange rate risk.

Reference no: EM132070885

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