Pittsburgh Co. Plans to invest its excess cash in Mexican pesos for 1 year. The 1 year Mexican peso rate is 19 percent. The probability of the pesos percentage change in value during the next year is as follows:

Possible rate of change in the Mexican peso over the life of the investment & probability of occurrence.

-15% = 20%

-4% = 50%

0 = 30%

What is the expected value of the effective yield based on this information?

Given that the US interest rate for 1 year is 7 percent, what is the probability that a 1 year investment in pesos will generate a lower effective yield than could be generated if Pittsburgh Co. Simply invested domestically?