Assume that Mexico has a one-year interest rate that is higher than the U.S. one-year interest rate. Assume that you believe in the international Fisher effect and interest rate parity.

Parker is based in the United States and attempts to speculate by purchasing Mexican pesos today, investing the pesos in a risk-free asset for a year, and then converting the pesos to dollars at the end of one year. Parker did not cover his position in the forward market.

Dani is based in Mexico and attempts covered interest arbitrage by purchasing dollars today and simultaneously selling dollars one year forward, investing the dollars in a risk-free asset for a year, and then converting the dollars back to pesos at the end of one year.

Based on your belief, which of the following is true? Assume zero transaction costs.

Group of answer choices

It is not possible to say who would have higher rate of return.

Dani and Parker should have the same rate of return.

Dani should have higher rate of return than Parker.

Parker should have higher rate of return than Dani.