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Advanced Questions 18. Investing in a Portfolio Pittsburgh Co. plans to invest its excess cash in Mexican pesos for one year. The one-year Mexican interest
Advanced Questions 18. Investing in a Portfolio 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 next: POSSIBLE RATE OF CHANGE IN THE MEXICAN PESO OVER THE LIFE OF THE INVESTMENT PROBABILITY OF OCCURRENCE 20% 50 30 15% -4 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
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