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Intro The annual risk-free interest rate is 8% in the U.S. and 5% in Mexico. The spot rate is $0.047 per peso and the one-year
Intro The annual risk-free interest rate is 8% in the U.S. and 5% in Mexico. The spot rate is $0.047 per peso and the one-year forward rate is $0.049 per peso. Part 1 - Attempt 1/5 for 10 pts. Who can profit from covered interest arbitrage, and how? Ignore taxes and transaction costs. O U.S. investors can profit by buying pesos in the forward market. O U.S. investors can profit by selling pesos in the forward market. Mexican investors can profit by buying dollars in the forward market. No one can profit from covered interest arbitrage. O Mexican investors can profit by selling dollars in the forward market. Submit
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