Assume that the difference between the US interest rate and the Mexican interest rate is 11 percent
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Assume that the difference between the US interest rate and the Mexican interest rate is 11 percent in favor of Mexico, but the forward discount rate for the Mexican peso is 20 percent. The discrepancy between the interest differential and the forward discount seem to open incentives for arbitrage. Could it be possible to take advantage of the opportunity for covered-interest arbitrage?
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Related Book For
Global Corporate Finance Text And Cases
ISBN: 9781405119900
6th Edition
Authors: Suk H. Kim, Seung H. Kim
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