Investing in a Portfolio Pittsburgh Co. plans to invest its excess cash in Mexican pesos for one year. The one-year Mexican interest rate is 19 percent. The probability of the pesos percentage change in value during the next year is shown next:

What is the expected value of the effective yield based on this information? Given that the U.S. interest rate for one year is 7 percent, what is the probability that a one-year investment in pesos will generate a lower effective yield than could be generated if Pittsburgh Co. simply invested domestically?

POSSIBLE RATE OF CHANGE IN THE MEXICAN PESO OVER THE LIFE OF THE INVESTMENT PROBABILITY OF OCCURRENCE -15% 20% -4 50 0 30