Pittsburgh Co. plans to invest its excess cash in Mexican pesos for one year. The one-year Mexican interest rate is 19 percent. The probability of the peso’s percentage change in value during the next year is shown below:

Possible Rate of Change

in the Mexican Peso over Probability of

the Life of the Investment Occurrence

- 15% ...... 20%

- 4 ...... 50

0 ...... 30

What is the expected value of the effective yield based on this information? Given that the U.S. interest rate for one year is 7 percent, what is the probability that a one-year investment in pesos will generate a lower effective yield than could be generated if Pittsburgh Co. simply invested domestically?