Q6. (25pts total).In early December 1994, the Mexican peso was trading at $ 0.30/peso.At the time, the 3month peso interest rate was 16%annuallyin Mexico, 6% annually in the U.S.Since January 1994, when the peso was trading at $ 0.33/peso, inflation had totaled 20% in Mexico, 3% in the U.S.

Three months later, in March 1995, following the peso crisis, the exchange rate was $ 0.20/peso.

Assume that covered interest parity (CIP) held at all times with no transaction costs.(Show your calculations!)

b)(5 pts).How many dollars would a speculator have made/lost if she hadsold1 million pesos forward against the dollar in early December 1994?