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Covered Interest Arbitrage. Assume the following information: Spot rate of Mexican peso = $.100 180day forward rate of Mexican peso = $0.098 180day Mexican interest
Covered Interest Arbitrage. Assume the following information:
Spot rate of Mexican peso | = $.100 |
180day forward rate of Mexican peso | = $0.098 |
180day Mexican interest rate | 0.06 |
180day U.S. interest rate | 0.050 |
Suppose an initial investment of 1,025,000 pesos. Given this information, Mexican Investors would generate a yield of ???
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