Question
Suppose a bank is quoting the following for the Mexican Peso/$ spot exchange rate, and sees the following interest rates (ignore bid/ask spreads): Spot exchange
Suppose a bank is quoting the following for the Mexican Peso/$ spot exchange rate, and sees the following interest rates (ignore bid/ask spreads):
Spot exchange rate: MXN 21.50/USD
Interest rate on a 180-day Mexican asset (quoted on an annual basis) = 4.95%
Interest rate on a 180-day US asset (quoted on an annual basis) = 0.28%
Given these quotes, what should be the 180-day forward MXN/USD exchange rate quoted by the bank under the assumption covered interest parity holds?
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Financial Markets And Institutions
Authors: Anthony Saunders, Marcia Cornett
4th Edition
0077262379, 978-0077262372
