Nanotronics is neither a banker nor an FX (foreign exchange) dealer. It takes the rates and figures in the market as they are given to it.

Spot rate: Buy rate MXN 19.235/USD;

Spot rate: Sell rate MXN 19.385/USD

Nine-month forward rate: Buy rate MXN 20.115/USD

Nine-month forward rate: Sell rate MXN 20.265/USD

U.S commercial interest rate (borrowing) 4.5 percent

U.S commercial interest rate (lending) 1.0 percent

Mexico commercial interest rate (borrowing or lending) 6.5 percent

Please guide Nanotronics where to invest.

. What happens if Nanotronics relaxes its desire to stay riskless, calculate a risk situation with the above data offset by a risk investment and a non-risk investment?

. discuss the pros and cons of such investment practice.

4. Would it be possible to forecast the outcome if the risk factor is left open (not managed)?

5. At the outset, how can a person check whether the U.S. and Mexican markets are in equilibrium or disequilibrium?