Frin Builders, a South African affordable houses company has signed a contract with the Kisumu County Government to build 50 affordable homes each year for a period of 5 years for resale. Each house that cost Shs. 1.65 million to construct will be sold at Shs.2.5 million each. Frin Builders cost of capital is 10%. Suppose the spot exchange rate is giver as ZAR I/Kes 13.5 and interest rates in Kenya is 10% while interest rates in South Africa is 7% throughout the period. What is the highest amount in South African Rands that Fria Builders should invest in Kenya? (Interest rate parity applies in forecasting annual exchange rates),

Frin Builders, a South African affordable houses company has signed a contract with the Kisumu County Government to build 50 affordable homes each year for a period of 5 years for resale. Each house that cost Shs. 1.65 million to construct will be sold at Shs.2.5 million each. Frin Builders cost of capital is 10%. Suppose the spot exchange rate is giver as ZAR I/Kes 13.5 and interest rates in Kenya is 10% while interest rates in South Africa is 7% throughout the period. What is the highest amount in South African Rands that Fria Builders should invest in Kenya? (Interest rate parity applies in forecasting annual exchange rates),

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Frin Builders, a South African affordable houses company has signed a contract with the
Kisumu County Government to build 50 affordable homes each year for a period of 5
years for resale. Each house that cost Shs. 1.65 million to construct will be sold at Shs.2.5
million each. Frin Builders cost of capital is 10%. Suppose the spot exchange rate is
giver as ZAR I/Kes 13.5 and interest rates in Kenya is 10% while interest rates in South
Africa is 1% throughout the period. What is the highest amount in South African Rands
that Frin Builders should invest in Kenya? (Interest rate parity applies in forecasting
annual <xchange rates).

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