Question
Interest rate in the US is 5% p. a. and in Mexico 45% p. a. Spot rate =6.25 (pesos per dollar) One year ahead forward
Interest rate in the US is 5% p. a. and in Mexico 45% p. a. Spot rate =6.25 (pesos per dollar) One year ahead forward rate = 7.25 (pesos per dollar) What is the profit made (in dollars) if an investor agrees to buy 10,000 pesos at the forward rate and the future spot rate after a year turns out to be 7.15 pesos per dollar?
| $17.99 | ||
| $18.22 | ||
| $18.75 | ||
| $19.29 |
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International Finance
Authors: Maurice D. Levi
4th Edition
