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Assume that the Mexican peso exhibits a 6-month interest rate of 6.5 percent, while the UAE dirham exhibits a 6-month interest rate of 4 percent.

Assume that the Mexican peso exhibits a 6-month interest rate of 6.5 percent, while the UAE dirham exhibits a 6-month interest rate of 4 percent. From a UAE investors perspective, the UAE dirham is the home currency. (1). Calculate, according to IRP, the forward rate premium of the peso with respect to the UAE dirham and (ii) calculate that the 6-month forward rate.

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