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23. Assume that a U.S. firm can invest funds for one year in the US, at 12% or invest funds in Mexico at 14%. The
23. Assume that a U.S. firm can invest funds for one year in the US, at 12% or invest funds in Mexico at 14%. The spot rate of the peso is S.10 while the one-year forward rate of the peso is $.10. IfU.S. firms attempt to use covered interest arbitrage, what forces should occur? a. spot rate of peso increases; forward rate of peso decreases. b. spot rate of peso decreases; forward rate of peso increases. c. spot rate of peso decreases forward rate of peso decreases d. spot rate of peso increases; forward rate of peso increases
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