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US interest rate is 5.00% and Mexico Interest rate 11.25%. The currency spot exchange rate is 17.24 MEX/$, Mexican Peso per one US Dollar. You
US interest rate is 5.00% and Mexico Interest rate 11.25%. The currency spot exchange rate is 17.24 MEX/$, Mexican Peso per one US Dollar. You observe a three-month forward contract trading at 18.00 MEX/$. Is there an arbitrage? If, so, describe all the transaction to take advantage of this arbitrage opportunity (forward rate calculated in the previous question is NOT available for trading).
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