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Covered Interest Arbitrage Assume the following information: Spot rate of Mexican peso $0.100 180-day forward rate of Mexican peso $0.098 180-day Mexican interest rate 6%

  1. Covered Interest Arbitrage Assume the following information:

    Spot rate of Mexican peso

    $0.100

    180-day forward rate of Mexican peso

    $0.098

    180-day Mexican interest rate

    6%

    180-day U.S. interest rate

    5%

    Given this information, is covered interest arbitrage worthwhile for Mexican investors who have pesos to invest? Explain your answer.

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