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Currently, the USD/MXN rate is 19.6300 and the three-month forward exchange rate is 20.1500. The three-month interest rate is 4.7% per annum in the U.S.
Currently, the USD/MXN rate is 19.6300 and the three-month forward exchange rate is 20.1500. The three-month interest rate is 4.7% per annum in the U.S. and 7.5% per annum in Mexico. Assume that you can borrow MXP10,000,000 or its equivalent in USD. How much do you make/lose if you borrow the foreign currency and invest locally? (USD, no cents)
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