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In your answer, please show all calculations. Please explain answers. Thank you! Arbitrage Opportunities - You have information on the interest rates in Mexico and

In your answer, please show all calculations. Please explain answers. Thank you!

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Arbitrage Opportunities - You have information on the interest rates in Mexico and Peru. Assume you are told that the existing one-year interest rate in Mexico is 8 percent and the one-year interest rate in Peru is 13 percent. Also assume that interest rate parity exists. - Should the forward rate of the Sol (i.e., the Peruvian currency) exhibit a discount or a premium? - If Mexican investors attempt to engage in covered interest arbitrage, what will be their return? If Peruvian investors attempt to engage in covered interest arbitrage, what will be their return? - Can you establish whether locational arbitrage is feasible in this set-up

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