Interest rate in the US is 5% p. a. and in Mexico 45% p. a. Spot rate =6.25 (pesos per dollar) One year ahead forwar

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answerhappygod
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Interest rate in the US is 5% p. a. and in Mexico 45% p. a. Spot rate =6.25 (pesos per dollar) One year ahead forwar

Post by answerhappygod »

Interest rate in the US is 5% p. a. and in Mexico
45% p. a.
Spot rate =6.25 (pesos per dollar)
One year ahead forward rate = 7.25 (pesos per
dollar)
What is the profit made if an investor borrows $100, converts to
pesos and invests in Mexico for a year? The forward rate is
used for conversion back to the dollar.
$20
$25
$30
$35
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