Cross Rate and Forward Rate Biscayne Co. will be receiving Mexican pesos today and will need to

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Cross Rate and Forward Rate Biscayne Co. will be receiving Mexican pesos today and will need to convert them into Australian dollars. Today, a U.S.

dollar can be exchanged for 10 Mexican pesos. An Australian dollar today is worth one-half of a U.S.

dollar.

a. What is the spot rate of a Mexican peso in Australian dollars?

b. Assume that interest rate parity exists and that the annual risk-free interest rate in the U.S., Australia, and Mexico is 7 percent. What is the 1-year forward rate of a Mexican peso in Australian dollars?

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International Financial Management

ISBN: 9780538482967

11th Edition

Authors: Jeff Madura

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Question Posted: Oct 16, 2024 09:01 AM

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Cross Rate and Forward Rate Biscayne Co. will be receiving Mexican pesos today and will need to

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International Financial Management

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