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Consider a Mexican investor looking to deposit 10,000 pesos in either Mexico or Canada. The 1-year interest rate on Canadian dollar-demoninated deposits is 5%. The
Consider a Mexican investor looking to deposit 10,000 pesos in either Mexico or Canada. The 1-year interest rate on Canadian dollar-demoninated deposits is 5%. The 1-year interest rate on peso-dominated deposits is 2%. The current spot exchange rate E_cs/peso is 0.1. The covered return or net rate of return (in percentage ) on Canadian deposits in terms of pesos when using a forward contract is.
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